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MARSH & McLENNAN COMPANIES
ANNUAL REPORT
Spotlight on 2014
Helping businesses meet the needs
of changing times and technologies
As women ascend, companies excel
STUDIES BY MERCER AND OLIVER WYMAN
A diverse and inclusive workforce enables organizations to thrive.
Diverse organizations harness the collective experience of their
people to provide fundamentally different, more holistic thinking
to clients and employees. When women actively participate in
companies, those companies outperform. When women are actively
engaged in economies, those economies do better.
In 2014, we conducted two studies to better understand the current
state of women in the workforce around the globe.
Mercer’s When Women Thrive, Businesses Thrive, which assessed
the health, financial wellbeing, and compensation of nearly
700,000 women, found that organizations are far from achieving
gender equality:
• Women continue to lag men in overall workforce participation and
in representation at the professional through executive levels.
• Current female hiring, promotion, and retention rates are
insufficient to create equality over the next decade.
• Current talent flows will move more women into top roles over
the next decade — but not in North America.
Building the future of analytics
INNOVATIONS BY MARSH AND GUY CARPENTER
Organizations today face the dual challenges of achieving growth in
an increasingly uncertain economic environment while managing an
array of interconnected risks.
Fortunately, analytics offer a new path in risk management.
Mobile technology, “big data,” risk-adjusted benchmarking, and
predictive analytics are leading to exciting new ways to analyze risk
and inform strategic business decisions. The ability to make these
decisions with confidence comes from having a comprehensive and
forward-looking picture of emerging risks.
Oliver Wyman’s Women in Financial Services analyzed the gender
mix of senior staff at more than 150 firms internationally and
surveyed over 1,000 current and potential financial services
employees from five countries. One key finding was a lack of
progression for women between mid and senior levels compared
to other industries. We also found a greater focus on encouraging
women to fit the system rather than evolving the culture and
organizational practices to provide a more inclusive environment
for all employees.
As a society, we collectively have a profound responsibility and
opportunity to close the gender gap, and our research points the
way. We are optimistic that organizations worldwide will seek
their own solutions to achieve gender equality.
Those who seize this moment for change are sure to outperform
those who remain on the sidelines.
By drawing on our proprietary data and analytics capabilities,
clients can enable risk-financing decisions in realtime, ensuring
better alignment with other strategic decisions. Some clients have
realized up to 10x returns on investment and significant cost savings
by adopting this dynamic view of risk and capital allocation, which
includes analysis of the potential losses and the cost-benefit of
insurance structures.
Our mobile, cloud-based risk management platform is helping
to move the market in an entirely new direction, but we are not
done yet. We will continue to push innovations in analytics and
risk management forward to deliver best-in-class solutions for
our clients — enabling them to make more informed decisions
and drive better results for their business.
This annual report contains “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995.
Please see “Information Concerning Forward-Looking Statements” on page (i) in the Form 10-K included in this annual report.
We are Marsh & McLennan
Companies: a global professional
services firm offering clients
advice and solutions in risk,
strategy, and people.
OUR FOUR OPERATING COMPANIES ARE:
WE ARE COMMITTED TO:
MARSH
A leader in insurance broking and risk management.
GUY CARPENTER
A leader in reinsurance and intermediary advisory services.
MERCER
A leader in talent, health, retirement, and investment consulting.
OLIVER WYMAN
A leader in management, economic, and brand strategy consulting.
ENABLING CLIENT SUCCESS
We anticipate the needs of our clients and act as their
trusted advisors.
FINDING THE SMARTER WAY
We never stop searching for a better solution.
WORKING SIDE-BY-SIDE
We collaborate across teams, business units, and global
offices to harness our collective intelligence.
LIVING THE GREATER GOOD
We act with integrity in all that we do and are committed to
building trusted relationships with our colleagues, clients,
shareholders, and communities.
1
DAN GLASER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARSH & McLENNAN COMPANIES
Letter to our
shareholders
At Marsh & McLennan Companies, our
expertise, creativity, and passion for
excellence enable us to help our clients
tackle today’s biggest challenges. Each
day, we have the opportunity to make a
difference, doing work that matters to
our colleagues, clients, shareholders,
communities, and to the world.
140+ years
OF HELPING CLIENTS ANTICIPATE AND
MEET THE NEEDS OF CHANGING TIMES AND
EVOLVING TECHNOLOGIES
It’s been that way through our more than 140-year history — we have
a deep heritage of helping clients anticipate and meet the needs of
changing times and evolving technologies — and it’s no different
today. Our work enables enterprise. Our competitive positioning as
a trusted advisor to our clients has never been stronger.
We are industry innovators and thought leaders. Clients look to
us for guidance on a range of critical issues such as advising an
aging population on how to save for retirement, managing global
healthcare costs, and developing and supporting growth strategies.
We help our clients anticipate and manage risk — and capture the
opportunities that risk creates.
We have built a community of talented colleagues, experts in their
fields, who thrive on working together and providing clients with
guidance and support during critical moments. We are an organization
energized by change, defined by deep specialization, and united by a
common purpose: making a difference.
3
CONSECUTIVE YEARS OF DOUBLE-DIGIT
GROWTH IN ADJUSTED OPERATING INCOME:
7 years
CONSECUTIVE YEARS OF ADJUSTED
OPERATING MARGIN GROWTH IN
BOTH OPERATING SEGMENTS:
5 years
ACHIEVING OUR FINANCIAL PERFORMANCE GOALS
We delivered another year of excellent performance in
2014. It’s a powerful story: strong revenue and EPS growth,
expanded operating margins, and increased return of capital
to shareholders through double-digit growth in dividends
and increased share repurchases.
Consolidated revenue rose to $13 billion, with underlying revenue
growth of 5% — our strongest increase in three years — with each
of our four operating companies contributing. Adjusted operating
income1 increased 10% to $2.3 billion, marking the seventh
consecutive year of double-digit growth. Over the past five years,
compound annual growth in adjusted earnings per share
has been 14.5%.
IN 2014, WE COMMITTED TO...
WE DELIVERED...
13%
LONG-TERM EPS GROWTH
14%
ADJUSTED EPS GROWTH IN 2014
Double-digit
DIVIDEND GROWTH
10.4%
DIVIDEND GROWTH
Reduce
OUR SHARE COUNT
7 million reduction
IN SHARES OUTSTANDING
$2.1 billion
ALLOCATED FOR DIVIDENDS,
ACQUISITIONS, AND
SHARE REPURCHASES
$2.3 billion
UTILIZED
1 For a reconciliation of non-GAAP results to GAAP results, as related to all non-GAAP references presented in this letter, please refer to the Company’s Form 8-K,
dated February 6, 2015, available on the Company’s website at www.mmc.com.
4
CHALLENGES OF A CHANGING GLOBAL LANDSCAPE
If history has taught us anything, it’s that a constantly evolving
business landscape is rife with risks and abounds with opportunities.
As we look at the world today, trends such as heightened focus on
cyber security, political and economic uncertainty, slowing economic
growth in developing economies, erratic oil prices, historically low
interest rates, and a strong US dollar are all gaining momentum.
They’re indicative not only of the issues governments, multinationals,
and most organizations face but also of how the speed of change
presents its own set of challenges and opportunities.
This increasingly complex, dynamic world galvanizes us to do
more, achieve more, think smarter, and challenge the status quo.
Clients come to us for answers to their most pressing problems in
risk, strategy, and people. Our operating companies can help to
develop the solutions.
“ This increasingly complex,
dynamic world galvanizes us to do
more, achieve more, think smarter,
and challenge the status quo.”
2014 marked the fifth straight year of margin expansion in both our
Risk & Insurance Services and Consulting segments — an indication
of the broad-based nature of our long-term growth.
Risk & Insurance Services, with revenue of $6.9 billion, expanded
its margin by 30 basis points. Within the segment:
• Marsh had another year of outstanding performance, with
substantial underlying revenue growth across all major
geographies and record new business development.
• Guy Carpenter delivered solid underlying revenue growth
despite significant industrywide headwinds.
Consulting, with revenue of $6.1 billion, produced robust growth.
Segment margin rose 160 basis points, resulting in record operating
income of nearly $1 billion. Within the segment:
• Mercer produced strong performance, with solid underlying
revenue growth, which drove the segment’s record profitability.
• Oliver Wyman’s underlying revenue growth of 15% reflected
double-digit increases in each quarter of 2014.
Our strong performance in 2014 is a direct result of our continued
investments in our businesses and in our people, giving them
the tools and support to help them succeed. Since 2009, we have
invested nearly $5 billion for growth and efficiencies, including:
• Capital expenditures of approximately $2 billion,
• 85 acquisitions and investment transactions totaling
approximately $3 billion, and
• Headcount increase of 7,600 colleagues, fueling the growth
of our operating companies around the world.
We further expanded our global footprint in 2014 with acquisitions
in Australia, Belgium, Scotland, Canada, Chile, and Panama, and
through our investment in Alexander Forbes in South Africa.
Marsh & McLennan Agency completed nine acquisitions in 2014,
highlighted by Barney & Barney, which established the Agency’s
West Coast hub.
5
I take great pride in what we have achieved in the last several
years, knowing that there’s still more work to be done to meet
our long-term goals.
I am grateful to lead a proven executive team known for keeping
its commitments and delivering results. Our Board of Directors
works closely with our executive team and me, providing us with
valuable guidance and expert knowledge. We are thankful for
their counsel. As we announced in 2014, Adele Simmons, who has
served our Board since 1978, will be retiring this May. We thank
Adele for her nearly four decades of service and many invaluable
contributions to our success.
Marsh & McLennan Companies is a $13 billion
global growth company with 57,000 dedicated
colleagues around the world. We are positioned
to thrive in a fast-changing global environment.
We have the talent, resources, and spirit to
achieve our goals. Our continued success is
made possible by the support of our colleagues,
clients, and shareholders.
Best regards,
DAN GLASER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARSH & McLENNAN COMPANIES
FEBRUARY 26, 2015
OUR CULTURE SETS US APART
Much has been written about the importance of corporate
cultures, and so, for me, someone who often challenges
conventional approaches, it’s a fair question to ask whether
a company’s culture matters.
In my view, there is no doubt. Great companies capable of
achieving superior sustained performance derive their success
from strong cultures that value excellence, innovation, collaboration,
and integrity. These are key attributes of our culture at Marsh &
McLennan Companies; we put them into practice every day.
Our work is guided by four powerful commitments: we enable
our clients’ success; we always seek the smarter way; we work
side-by-side to harness our collective intelligence; and we live the
greater good by acting with integrity.
We challenge ourselves to redefine what is possible. We pursue
relentless improvement in all that we do, as we strive to anticipate
and thrive in the face of new trends and to serve our clients with
continued excellence.
In 2014, we expanded our voice and advised clients on some of
the most complex issues of our day. We introduced data analytics
that have the power to change risk management. We carried out
extensive analysis of the challenges facing retirement systems
around the world and helped clients connect their employees’
desire for a secure financial future with the business need to create
a high-performing workforce. We released important studies
analyzing gender equality, assessing the current state of women in
the workplace globally, concluding that companies that seize the
moment for change outperform those that move too slowly.
Our workforce is diverse, inclusive, and engaged. We encourage
our people to voice their ideas and raise concerns. We build our
talent with ongoing learning and development programs, nurture
leadership capabilities, and seek to attract the best, most qualified
recruits to our organization.
As a committed corporate citizen, we encourage our colleagues
to contribute their time, talents, and skills to help our communities.
We embody our commitment to integrity in a vibrant code of
conduct conveyed across the enterprise through creative and
inspiring communications.
Our culture sets us apart.
6
Top, from left: Morton O. Schapiro, H. Edward Hanway, Steven A. Mills, Bruce P. Nolop, Daniel S. Glaser, Marc D. Oken, Lloyd M. Yates, Oscar Fanjul
Bottom, from left: R. David Yost, Elaine La Roche, Lord Lang of Monkton, Adele Simmons
OUR BOARD OF DIRECTORS
OSCAR FANJUL
Vice Chairman, Omega Capital
Former Chairman and
Chief Executive Officer, Repsol
DANIEL S. GLASER
President and Chief Executive Officer,
Marsh & McLennan Companies
H. EDWARD HANWAY
Former Chairman and
Chief Executive Officer,
CIGNA Corporation
LORD LANG OF MONKTON
Independent Chairman,
Marsh & McLennan Companies
Former Member of British Parliament
Former British Secretary of State for
Trade and Industry
ELAINE LA ROCHE
Senior Advisor,
China International Capital Corporation US
Former Chief Executive Officer, China
International Capital Corporation, Beijing
STEVEN A. MILLS
Executive Vice President,
Software & Systems,
International Business Machines
Corporation (IBM)
BRUCE P. NOLOP
Former Chief Financial Officer,
E*Trade Financial Corporation
MARC D. OKEN
Managing Partner,
Falfurrias Capital Partners
Former Chief Financial Officer,
Bank of America Corporation
MORTON O. SCHAPIRO
President, Northwestern University
ADELE SIMMONS
President, Global Philanthropy Partnership
LLOYD M. YATES
Executive Vice President, Market Solutions &
President, Carolinas—Duke Energy
R. DAVID YOST
Former President and
Chief Executive Officer,
AmerisourceBergen Corporation
7
Top, from left: E. Scott Gilbert, J. Michael Bischoff, Scott McDonald, Peter Zaffino, Alexander S. Moczarski, Peter J. Beshar
Bottom, from left: Daniel S. Glaser, Laurie Ledford, Julio A. Portalatin
DANIEL S. GLASER
President and Chief Executive Officer,
Marsh & McLennan Companies
ALEXANDER S. MOCZARSKI
President and Chief Executive Officer,
Guy Carpenter
LAURIE LEDFORD
Senior Vice President and
Chief Human Resources Officer,
Marsh & McLennan Companies
SCOTT McDONALD
President and Chief Executive Officer,
Oliver Wyman Group
JULIO A. PORTALATIN
President and Chief Executive Officer,
Mercer
PETER ZAFFINO
President and Chief Executive Officer,
Marsh
OUR EXECUTIVE COMMITTEE
PETER J. BESHAR
Executive Vice President and
General Counsel,
Marsh & McLennan Companies
J. MICHAEL BISCHOFF
Chief Financial Officer,
Marsh & McLennan Companies
E. SCOTT GILBERT
Senior Vice President and
Chief Risk & Compliance Officer,
Marsh & McLennan Companies
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
Commission File No. 1-5998
_____________________________________________
Marsh & McLennan Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
36-2668272
(I.R.S. Employer Identification No.)
1166 Avenue of the Americas
New York, New York 10036-2774
(Address of principal executive offices; Zip Code)
(212) 345-5000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share
Title of each class
Name of each exchange on which registered
New York Stock Exchange
Chicago Stock Exchange
London Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting Company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting Company” in Rule 12b-2
of the Exchange Act. (Check one):
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
(Do not check if a smaller reporting company)
Smaller Reporting Company
Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of June 30, 2014, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was
approximately $28,219,746,395 computed by reference to the closing price of such stock as reported on the New York Stock
Exchange on June 30, 2014.
As of February 20, 2015, there were outstanding 538,779,514 shares of common stock, par value $1.00 per share, of the registrant.
Portions of Marsh & McLennan Companies, Inc.’s Notice of Annual Meeting and Proxy Statement for the 2015 Annual Meeting of
Stockholders (the “2015 Proxy Statement”) are incorporated by reference in Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements," as defined in the Private
Securities Litigation Reform Act of 1995. These statements, which express management's current views
concerning future events or results, use words like "anticipate," "assume," "believe," "continue,"
"estimate," "expect," "future," "intend," "plan," "project" and similar terms, and future or conditional tense
verbs like "could," "may," "might," "should," "will" and "would." For example, we may use forward-looking
statements when addressing topics such as: the outcome of contingencies; the expected impact of
acquisitions and dispositions; the impact of competition; pension obligations; the impact of foreign
currency exchange rates; our effective tax rates; changes in our business strategies and methods of
generating revenue; the development and performance of our services and products; changes in the
composition or level of our revenues; our cost structure, dividend policy, cash flow and liquidity; future
actions by regulators; and the impact of changes in accounting rules.
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, among other things:
the impact of competition, including with respect to our geographic reach, the sophistication and
quality of our services, our pricing relative to competitors, our customers' option to self-insure or
use internal resources instead of consultants, and our corporate tax rates relative to a number of
our competitors;
the extent to which we retain existing clients and attract new business, and our ability to
incentivize and retain key employees;
the impact on expenses relating to our global pension plans of discount rates and asset returns
and of projected salary increases, mortality rates, demographics, inflation, and cash contributions
due to changes in the funded status of our global defined benefit pension plans;
the impact on our net income of fluctuations in foreign currency exchange rates, particularly in
light of the recent strengthening of the U.S. dollar against most other currencies worldwide;
our ability to maintain adequate physical, technical and administrative safeguards to protect the
security of confidential, personal or proprietary information, and the potential for a system or
network disruption that results in regulatory penalties, remedial costs or the improper disclosure
or use of such information;
our exposure to potential liabilities arising from errors and omissions claims against us;
our exposure to potential civil remedies or criminal penalties if we fail to comply with foreign and
U.S. laws that are applicable in the domestic and international jurisdictions in which we operate,
including evolving sanctions against Russia and existing trade sanctions laws relating to countries
such as Cuba, Iran, Sudan and Syria, anti-corruption laws such as the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act 2010, local laws prohibiting corrupt payments to
government officials, as well as import and export restrictions;
our ability to make acquisitions and dispositions and to integrate, and realize expected synergies,
savings or benefits from, the businesses we acquire;
our ability to successfully recover should we experience a disaster or other business continuity
problem, such as an earthquake, hurricane, flood, terrorist attack, pandemic, security breach,
cyber attack, power loss, telecommunications failure or other natural or man-made disaster;
the impact of changes in interest rates and deterioration of counterparty credit quality on our cash
balances and the performance of our investment portfolios, including corporate and fiduciary
funds;
the potential impact of rating agency actions on our cost of financing and ability to borrow, as well
as on our operating costs and competitive position;
changes in applicable tax or accounting requirements; and
i
potential income statement effects from the application of FASB's ASC Topic No. 740 ("Income
Taxes") regarding accounting treatment of uncertain tax benefits and valuation allowances,
including the effect of any subsequent adjustments to the estimates we use in applying this
accounting standard.
The factors identified above are not exhaustive. Marsh & McLennan Companies and its subsidiaries
operate in a dynamic business environment in which new risks emerge frequently. Accordingly, we
caution readers not to place undue reliance on any forward-looking statements included herein, which are
based only on information currently available to us and speak only as of the dates on which they are
made. The Company undertakes no obligation to update or revise any forward-looking statement to
reflect events or circumstances arising after the date on which it is made. Further information concerning
Marsh & McLennan Companies and its businesses, including information about factors that could
materially affect our results of operations and financial condition, is contained in the Company's filings
with the Securities and Exchange Commission, including the "Risk Factors" section in Part I, Item 1A of
this report and the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" section in Part II, Item 7 of this report.
ii
TABLE OF CONTENTS
Information Concerning Forward-Looking Statements
PART I
Item 1 —
Business
Item 1A —
Risk Factors
Item 1B —
Unresolved Staff Comments
Item 2 —
Item 3 —
Item 4 —
PART II
Item 5 —
Item 6 —
Item 7 —
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Company’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A —
Quantitative and Qualitative Disclosures About Market Risk
Item 8 —
Financial Statements and Supplementary Data
Item 9 —
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 9A —
Controls and Procedures
Item 9B —
Other Information
PART III
Item 10 —
Directors, Executive Officers and Corporate Governance
Item 11 —
Executive Compensation
Item 12 —
Item 13 —
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Item 14 —
Principal Accountant Fees and Services
PART IV
Item 15 —
Exhibits and Financial Statement Schedules
Signatures
i
1
11
23
23
23
23
24
25
26
45
47
99
99
101
102
102
102
102
102
103
iii
ITEM 1. BUSINESS.
PART I
References in this report to “we”, “us” and “our” are to Marsh & McLennan Companies, Inc. (the
“Company”) and one or more of its subsidiaries, as the context requires.
GENERAL
The Company is a global professional services firm offering clients advice and solutions in risk, strategy
and people. It is the parent company of a number of leading risk experts and specialty consultants,
including: Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and
reinsurance specialist; Mercer, the provider of HR and related financial advice and services; and Oliver
Wyman Group, the management, economic and brand consultancy. With approximately 57,000
employees worldwide and annual revenue of approximately $13 billion, the Company provides analysis,
advice and transactional capabilities to clients in more than 130 countries.
The Company conducts business through two segments:
• Risk and Insurance Services includes risk management activities (risk advice, risk transfer and
risk control and mitigation solutions) as well as insurance and reinsurance broking and services.
We conduct business in this segment through Marsh and Guy Carpenter.
• Consulting includes Health, Retirement, Talent and Investments consulting services and
products, and specialized management, economic and brand consulting services. We conduct
business in this segment through Mercer and Oliver Wyman Group.
We describe our current segments in further detail below. We provide financial information about our
segments in our consolidated financial statements included under Part II, Item 8 of this report.
OUR BUSINESSES
RISK AND INSURANCE SERVICES
The Risk and Insurance Services segment generated approximately 54% of the Company's total revenue
in 2014 and employs approximately 30,800 colleagues worldwide. The Company conducts business in
this segment through Marsh and Guy Carpenter.
MARSH
Marsh is a world leader in delivering risk and insurance services and solutions to its clients. From its
founding in 1871 to the present day, Marsh has provided thought leadership and innovation for clients and
the insurance industry, introducing and promoting the concept and practice of client representation
through brokerage, the discipline of risk management, the globalization of insurance and risk
management services and many other innovative tools and service platforms.
Marsh generated approximately 45% of the Company's total revenue in 2014. Approximately 28,400
Marsh colleagues provide risk management, risk consulting, insurance broking, alternative risk financing,
and insurance program management services to a wide range of businesses, government entities,
professional service organizations and individuals in more than 130 countries.
Marsh's clients vary by size, industry, geography and risk exposures. Marsh is organized to serve clients
efficiently and effectively, delivering solutions tailored to the level of complexity of risk and geographic
footprint and matched to clients' buying styles.
Insurance Broking and Risk Consulting
In its main insurance broking and risk consulting business, Marsh employs a team approach to address
clients' risk management and insurance needs. Each client relationship is coordinated by a client
executive or client manager who draws from the many industry and risk specialties within Marsh to
assemble the resources needed to assist clients in analyzing, measuring and managing their various
risks. Product and service offerings include program design and placement, post-placement program
support and administration, claims support and advocacy, alternative risk strategies, and a wide array of
risk analysis and risk management consulting services. Within Marsh, there are significant specialties or
1
businesses in addition to its main brokerage operations that serve as an important part of the overall
capabilities it provides to its broad range of clients. These include Marsh & McLennan Agency; Schinnerer
Group; Sponsored Programs; Private Client Services; and Torrent Technologies.
Risk, Specialty and Industry Practices. In further support of the strategic, operational and risk
management objectives of its core brokerage clients, Marsh provides consultative advice, brokerage and
claims advocacy services through dedicated practices in the areas listed below. For both large and mid-
size organizations, colleagues in these practices apply their experience and working knowledge of clients'
industry sectors, and of the unique environments in which they operate, to facilitate the requisite breadth
of coverage and to reduce the cost of risk.
Risk & Specialty Practices
Industry Practices
• Aviation & Aerospace
• Casualty
• Claims
• Employee Benefits
• Energy
• Environmental
• Financial and Professional (FINPRO)
• Marine
• Political Risk
• Premium Finance
• Agriculture
• Chemicals
• Communications, Media and Technology
• Construction
• Education
• Financial Institutions
• Healthcare
• Hospitality & Gaming
• Life Sciences
• Manufacturing and Automotive
• Private Equity and Mergers & Acquisitions (PEMA)
• Mining, Metals & Minerals
• Product Recall
• Project Risk
• Property
• Surety
• Trade Credit
• Workers’ Compensation
Global Risk and Specialties
• Power & Utilities
• Public Entities
• Real Estate
• Retail / Wholesale
• Sports, Entertainment & Events
• Transportation
In 2014, the management of Marsh Global Analytics, Marsh Risk Consulting, Captive Solutions, CS
STARS, Insurer Consulting Group, Multinational Client Service, Bowring Marsh and Marsh's Specialty
Practices were combined into one business unit called Global Risk and Specialties.
Marsh Global Analytics helps organizations use data and analytical tools to better understand risks,
make more informed decisions, support the implementation of innovative solutions and strategies, and
ultimately reduce costs. The principal tools employed include data from Marsh’s extensive Global
Benchmarking Portal, statistical and financial analyses, decision modeling, catastrophic loss modeling,
and the Marsh Analytical Platform.
Marsh Risk Consulting (MRC) is a global organization comprised of specialists dedicated to providing
clients with advice and solutions across a comprehensive range of risk issues. MRC helps clients identify
exposures, assess critical business functions and evaluate existing risk treatment practices and
strategies. MRC provides client services in four main areas of exposure:
• Property Risk Consulting: Delivers a range of property risk engineering and loss control
identification, assessment, and mitigation consulting solutions.
• Workforce Strategies: Supports clients' efforts to reduce workers' compensation loss costs,
increase the quality, safety, and efficiency of operations, and develop and implement sustainable
safety and health management systems.
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• Financial Advisory, Claims, Litigation Support: Provides a range of services, including forensic
accounting, complex claim consulting and management, claim accounting preparation, mass tort
consulting, and construction delay and dispute consulting.
• Strategic Risk Consulting: Provides a range of services, including crisis management,
reputational risk, and enterprise risk and resiliency services.
Captive Solutions. Operating in 42 captive domiciles, along with consulting expertise residing in Marsh
brokerage offices worldwide, the Captive Solutions practice serves more than 1,250 captive facilities,
including single-parent captives, reinsurance pools, risk retention groups and others. The practice
includes the Captive Advisory group, a consulting arm that performs captive feasibility studies and helps
to structure and implement captive solutions; Captive Management, an industry leader in managing
captive facilities and in providing administrative, consultative and insurance-related services; and the
Actuarial Services group, comprised of credentialed actuaries and supporting actuarial analysts.
CS STARS serves the needs of risk management professionals, as well as insurance carriers and third-
party administrators, through integrated technology, analytics and data services solutions across risk,
safety and claims management. CS Stars enables its customers to analyze trends, gain industry insights,
optimize decision-making, and reduce costs across the entire risk lifecycle.
Insurer Consulting Group. Marsh provides consulting, data analytics and other services to insurers.
Through Marsh's patented electronic platform, MarketConnect, and through other data analyses, Marsh
provides to insurers individualized preference setting and risk identification capabilities, as well as
detailed performance data and metrics. Insurer consulting teams review performance metrics and
preferences with insurers. Marsh's Insurer Consulting services are designed to improve the product
offerings available to Marsh’s clients, assist insurers in identifying new opportunities, and enhance
insurers’ operational efficiency. The scope and nature of the services vary by insurer and by geography.
Multinational Client Service (MCS) is focused on delivering service excellence and insurance solutions
to multinational clients. MCS provides risk management programs with a service platform that comprises
a combination of proprietary tools and technology and specialized resources. MCS provides global
expertise and an intimate knowledge of local markets, helping clients navigate local regulatory
environments and address the worldwide risk issues that confront them.
Bowring Marsh is an international placement broker for property and casualty risks. Bowring Marsh
utilizes placement expertise in major international insurance market hubs, including Bermuda, Brazil,
China, Dubai, Dublin, Hong Kong, London, Madrid, Miami, Singapore, South Korea, Tokyo and Zurich,
and an integrated global network to secure advantageous terms and conditions for its clients throughout
the world.
Marsh & McLennan Agency.
Established in 2008, Marsh & McLennan Agency ("MMA") services are targeted to customers who seek
professional advice on program structure, market knowledge, experience and expertise in their industry,
competitive prices, and local resources and service professionals. MMA offers a broad range of
commercial property, casualty and surety products and services, personal lines, as well as a broad range
of solutions for employee health and benefits, retirement and administration needs, and life insurance/
estate planning to clients through a dedicated sales and service force in retail locations.
Schinnerer Group.
The Schinnerer Group's operations are comprised of Victor O. Schinnerer & Co. in the U.S. and ENCON
Group Inc. in Canada. As one of the largest underwriting managers of professional liability and specialty
insurance programs in the United States, Victor O. Schinnerer & Co. provides risk management and
insurance solutions to clients through licensed brokers. ENCON Group Inc., a leading managing general
agent in Canada, offers professional liability and construction insurance, as well as group and retiree
benefits programs for individuals, professionals, organizations and businesses, through a national
network of licensed insurance brokers and plan advisors.
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Sponsored Programs; Private Client Services.
Marsh operates business units that focus on affinity/program marketing and administration opportunities
and high net worth individual personal lines insurance. Sponsored Programs is an affinity/program
business that customizes commercial insurance programs and other business management solutions to
meet the needs of franchisors, independent contractors, and other networks of businesses and their
affiliates. Private Client Services provides sales and service to high net worth individuals, families and
their advisors and family offices, focusing on delivery of property and casualty risk management solutions.
Torrent Technologies.
On November 17, 2014, Marsh acquired Torrent Technologies, Inc., a leading service provider to Write
Your Own (WYO) insurers participating in the National Flood Insurance Program (NFIP). Remaining
headquartered in Kalispell, Montana, Torrent's employees have combined with Marsh's existing flood
insurance specialists to create a Flood Center of Excellence, offering a comprehensive suite of flood
insurance products and services. Torrent and Marsh also have demonstrated capabilities in the non-NFIP
retail flood space and in providing other non-NFIP flood insurance administration services to mortgage
lenders and other businesses.
GUY CARPENTER
Guy Carpenter generated approximately 9% of the Company's total revenue in 2014. Approximately
2,400 Guy Carpenter professionals help clients with a combination of specialized reinsurance broking
expertise, strategic advisory services, and analytics. Guy Carpenter teams create and execute
reinsurance and risk management solutions for clients worldwide, by providing risk assessment analytics,
actuarial services, highly specialized product knowledge and trading relationships with reinsurance
markets. Client services also include contract and claims management and fiduciary accounting.
Acting as a broker or intermediary on all classes of reinsurance, Guy Carpenter places two main types of
property and casualty reinsurance: treaty reinsurance, which involves the transfer of a portfolio of risks;
and facultative reinsurance, which entails the transfer of part or all of the coverage provided by a single
insurance policy.
Guy Carpenter provides reinsurance services in a broad range of specialty practice areas, including:
agriculture; alternative risk transfer (such as group-based captives and insurance pools); aviation &
aerospace; casualty clash (losses involving multiple policies or insureds); construction and engineering;
credit, bond & political risk; excess & umbrella; general casualty; life, accident & health; marine and
energy; medical professional liability; professional liability; program manager solutions; property;
retrocessional reinsurance (reinsurance between reinsurers); surety (reinsurance of surety bonds and
other financial guarantees); terror risk and workers compensation.
Guy Carpenter also offers clients alternatives to traditional reinsurance, including industry loss warranties
and, through its licensed affiliates, capital markets alternatives such as transferring catastrophe risk
through the issuance of risk-linked securities. GC Securities, the Guy Carpenter division of MMC
Securities Corp. and MMC Securities (Europe) Limited, respectively, offers corporate finance solutions,
including mergers & acquisitions and private debt and equity capital raising, and capital markets-based
risk transfer solutions that complement Guy Carpenter's strong industry relationships, analytical
capabilities and reinsurance expertise.
In addition, Guy Carpenter provides its clients with numerous reinsurance-related services, such as
actuarial, enterprise risk management, financial and regulatory consulting, portfolio analysis and advice
on the efficient use of capital. Guy Carpenter's GC Analytics® unit serves as a local resource that helps
clients better understand and quantify the uncertainties inherent in their businesses. Working in close
partnership with Guy Carpenter account executives, GC Analytics specialists can help support clients'
critical decisions in numerous areas, including reinsurance utilization, catastrophe exposure portfolio
management, new product/market development, rating agency, regulatory and account impacts, loss
reserve risk, capital adequacy and return on capital.
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Compensation for Services in Risk and Insurance Services
Marsh and Guy Carpenter are compensated for brokerage and consulting services through commissions
and fees. Commission rates and fees vary in amount and can depend upon a number of factors, including
the type of insurance or reinsurance coverage provided, the particular insurer or reinsurer selected, the
capacity in which the broker acts, and negotiations with clients. In addition to compensation from its
clients, Marsh also receives compensation from insurance companies. This compensation includes,
among other things, payment for consulting and analytics services provided to insurers; administrative
and other services provided to or on behalf of insurers (including services relating to the administration
and management of quota shares, panels and other facilities in which insurers participate); and
contingent commissions in parts of its operations.
Marsh and Guy Carpenter receive interest income on certain funds (such as premiums and claims
proceeds) held in a fiduciary capacity for others. For a more detailed discussion of revenue sources and
factors affecting revenue in our Risk and Insurance Services segment, see Part II, Item 7 (“Management's
Discussion and Analysis of Financial Condition and Results of Operations”) of this report.
CONSULTING
The Company's consulting segment generated approximately 46% of the Company's total revenue in
2014 and employs approximately 24,300 colleagues worldwide. The Company conducts business in this
segment through Mercer and Oliver Wyman Group.
MERCER
Mercer is a global consulting leader in Health, Retirement, Investments and Talent. Mercer helps clients
around the world advance the health, wealth and performance of their most vital asset - their people.
Mercer's approximately 20,600 employees are based in more than 40 countries. Clients include a majority
of the companies in the Fortune 1000 and FTSE 100, as well as medium- and small-market
organizations. Mercer generated approximately 34% of the Company's total revenue in 2014.
Mercer operates in the following areas:
Health. In its Health & Benefits business, Mercer assists public and private sector employers in the
design, management and administration of employee health care programs; compliance with local
benefits-related regulations; and the establishment of health and welfare benefits coverage for
employees. Mercer provides a range of advice and solutions to clients, which, depending on the
engagement, may include: total health management strategies; global health brokerage solutions; vendor
performance and audit; life and disability management; and measurement of healthcare provider
performance. These services are provided through traditional fee-based consulting as well as
commission-based brokerage services in connection with the selection of insurance companies and
healthcare providers. Mercer also provides products and solutions for private active and retiree
exchanges in the United States, including its Mercer MarketplaceSM private exchange.
Retirement. Mercer provides a wide range of strategic and compliance-related retirement services and
solutions to corporate, governmental and institutional clients. Mercer assists clients worldwide in the
design, governance and risk management of defined benefit, defined contribution and hybrid retirement
plans. Mercer's approach to retirement services enables clients to consider the benefits, accounting,
funding and investment aspects of plan design and management in the context of business objectives
and governance requirements.
Investments. Mercer provides investment consulting and other services to the sponsors of pension
funds, foundations, endowments, other investors and wealth management companies in more than 40
countries. Mercer's services cover all stages of the institutional investment process, from strategy,
structure and implementation to ongoing portfolio management.
Mercer provides delegated investment solutions (fiduciary management) to institutional investors
including retirement plans, endowments and foundations and wealth managers, primarily through
investment in manager of manager funds sponsored and managed by Mercer. Solutions include services
for defined benefit and defined contribution plans utilizing our expertise in liability-driven investment and
actuarial techniques, and personal wealth solutions. Mercer offers a diverse range of solutions to meet a
full spectrum of risk/return preferences and manages investment vehicles across a range of investment
5
strategies for clients globally. As of December 31, 2014, Mercer had assets under management of $116
billion worldwide.
Mercer also provides benefits administration services to clients globally as part of its Retirement, Health
and Investments businesses. Mercer's administration offerings include total benefits outsourcing; total
retirement outsourcing, including administration and delivery for retirement benefits; and stand-alone
services for defined benefit administration, defined contribution administration, health benefits
administration and flexible benefits programs.
Talent. Mercer's talent businesses advise organizations on the engagement, management and
rewarding of employees; the design of executive remuneration programs; and improvement of human
resource (HR) effectiveness. Through proprietary survey data and decision support tools, Mercer's
Information Products Solutions business provides clients with human capital information and analytical
capabilities to improve strategic human capital decision making. Mercer's Communications business
helps clients plan and implement HR programs and other organizational changes designed to maximize
employee engagement, drive desired employee behaviors and achieve improvements in business
performance.
OLIVER WYMAN GROUP
With approximately 3,700 professionals and offices in 25 countries, Oliver Wyman Group delivers
advisory services to clients through three operating units, each of which is a leader in its field: Oliver
Wyman; Lippincott; and NERA Economic Consulting. Oliver Wyman Group generated approximately 13%
of the Company's total revenue in 2014.
Oliver Wyman is a leading global management consulting firm. Oliver Wyman's consultants specialize by
industry and functional area, allowing clients to benefit from both deep sector knowledge and specialized
expertise in strategy, operations, risk management and organization transformation. Industry groups
include:
• Automotive
• Aviation, Aerospace & Defense
• Business Services
• Communications, Media & Technology
• Distribution & Wholesale
• Energy
• Financial services (including corporate and institutional banking, insurance, wealth and asset
management, public policy, and retail and business banking)
• Health & Life Sciences
•
Industrial products
• Retail & consumer products
• Surface transportation
Oliver Wyman overlays its industry knowledge with expertise in the following functional specializations:
• Actuarial. Oliver Wyman offers actuarial consulting services to public and private enterprises,
self-insured group organizations, insurance companies, government entities, insurance regulatory
agencies and other organizations.
• Business & Organization Transformation. Oliver Wyman advises organizations undergoing or
anticipating profound change or facing strategic discontinuities or risks by providing guidance on
leading the institution, structuring its operations, improving its performance, and building its
organizational capabilities.
• Corporate Finance & Restructuring. Oliver Wyman provides an array of capabilities to support
investment decision making by private equity funds, hedge funds, sovereign wealth funds,
investment banks, commercial banks, arrangers, strategic investors, and insurers.
• Digital. Oliver Wyman has a dedicated cross-industry team helping clients to capitalize on the
opportunities created by digital technology and address the strategic threats.
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• Marketing & Sales. Oliver Wyman advises leading firms in the areas of offer/pricing optimization;
product/service portfolio management; product innovation; marketing spend optimization; value-
based customer management; and sales and distribution model transformation.
• Oliver Wyman Labs. Oliver Wyman applies innovative approaches to technology to drive
business impact for its clients. The mission of OW Labs is to help clients to unleash the power of
the information they already have or could capture - essentially to become knowledge-powered
businesses - and through that to drive competitive advantage and sustained impact.
• Operations & Technology. Oliver Wyman offers market-leading IT organization design, IT
economics management, Lean Six Sigma principles and methodologies, and sourcing expertise
to clients across a broad range of industries.
• Risk Management. Oliver Wyman works with chief financial officers, chief risk officers, and other
senior finance and risk management executives of corporations and financial institutions. Oliver
Wyman provides a range of services that provide effective, customized solutions to the
challenges presented by the evolving roles, needs and priorities of these individuals and
organizations.
• Strategy. Oliver Wyman is a leading provider of corporate strategy advice and solutions in the
areas of growth strategy and corporate portfolio; non-organic growth and M&A; performance
improvement; business design and innovation; corporate center and shared services; and
strategic planning.
• Sustainability Center. The Sustainability Center at Oliver Wyman supports leading companies
and governments around the world in their efforts to foster economic growth while encouraging
more responsible use of natural resources and environmental protection.
• Value Sourcing. Oliver Wyman helps organizations with optimization of purchasing processes or
organization; cost monitoring; low-cost country sourcing; supply chain management; strategic
sourcing; sequenced supply; part kitting; and with transforming procurement into a strong
competitive advantage, delivering sustained value.
Lippincott is a brand strategy and design consulting firm that advises corporations around the world in a
variety of industries on corporate branding, identity and image. Lippincott has helped create some of the
world's most recognized brands.
NERA Economic Consulting provides economic analysis and advice to public and private entities to
achieve practical solutions to highly complex business and legal issues arising from competition,
regulation, public policy, strategy, finance and litigation. NERA professionals operate worldwide assisting
clients including corporations, governments, law firms, regulatory agencies, trade associations, and
international agencies. NERA's specialized practice areas include: antitrust; securities; complex
commercial litigation; energy; environmental economics; network industries; intellectual property; product
liability and mass torts; and transfer pricing.
Compensation for Services in Consulting
Mercer and the Oliver Wyman Group businesses are compensated for advice and services primarily
through fees paid by clients. Mercer's Health & Benefits business is compensated through commissions
for the placement of insurance contracts (comprising more than half of the revenue in the Health &
Benefits business) and consulting fees. Mercer's delegated Investment Management business and
certain of Mercer's defined contribution administration services are compensated typically through fees
based on assets under administration and/or management. For a majority of the funds, revenue received
from Mercer's investment management clients as sub-advisor fees is reported in accordance with U.S.
GAAP, on a gross basis rather than a net basis. For a more detailed discussion of revenue sources and
factors affecting revenue in the Consulting segment, see Part II, Item 7 (“Management's Discussion and
Analysis of Financial Condition and Results of Operations”) of this report.
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REGULATION
The Company's activities are subject to licensing requirements and extensive regulation under United
States federal and state laws, as well as laws of other countries in which the Company's subsidiaries
operate. See Part I, Item 1A (“Risk Factors”) below for a discussion of how actions by regulatory
authorities or changes in legislation and regulation in the jurisdictions in which we operate may have an
adverse effect on our businesses.
Risk and Insurance Services. While laws and regulations vary from location to location, every state of
the United States and most foreign jurisdictions require insurance market intermediaries and related
service providers (such as insurance brokers, agents and consultants, reinsurance brokers and managing
general agents) to hold an individual and/or company license from a governmental agency or self-
regulatory organization. Some jurisdictions issue licenses only to individual residents or locally-owned
business entities; in those instances, if the Company has no licensed subsidiary, it may maintain
arrangements with residents or business entities licensed to act in such jurisdiction. Such arrangements
are subject to an internal review and approval process. Licensing of reinsurance intermediaries is
generally less rigorous compared to that of insurance brokers, and most jurisdictions require only
corporate reinsurance intermediary licenses.
The Insurance Mediation Directive was adopted by the United Kingdom and 26 other European Union
Member States in 2005. Its implementation gave powers to the Financial Services Authority ("FSA"), the
United Kingdom regulator at the time, to expand their responsibilities in line with the Financial Services
and Markets Act, the result of which was the regulation of insurance and reinsurance intermediaries. The
enhanced regulatory regime effected a licensing system based on an assessment of factors which
included professional competence, financial capacity and the requirement to hold professional indemnity
insurance. In April 2013, the FSA was superseded by the Financial Conduct Authority (“FCA”). In April
2014, the FCA’s responsibilities were expanded further to include the regulation of credit activities for
consumers. This included the broking of premium finance to consumers who wished to spread the cost of
their insurance. In April 2015, the FCA will also obtain their concurrent competition powers enabling them
to enforce the prohibitions on anti-competitive behavior in relation to financial services.
Insurance authorities in the United States and certain other jurisdictions in which the Company's
subsidiaries do business, including the FCA in the United Kingdom, also have enacted laws and
regulations governing the investment of funds, such as premiums and claims proceeds, held in a fiduciary
capacity for others. These laws and regulations typically provide for segregation of these fiduciary funds
and limit the types of investments that may be made with them, and generally apply to both the insurance
and reinsurance business. The FCA rules which protect client assets and client money are currently being
reviewed by the FCA with changes intended to provide enhanced protection to client funds expected in
the second quarter of 2015.
Certain of the Company's Risk and Insurance Services activities are governed by other regulatory bodies,
such as investment, securities and futures licensing authorities. In the United States, Marsh and Guy
Carpenter use the services of MMC Securities Corp., a broker-dealer, investment adviser and introducing
broker, registered in the U.S. with the SEC and the Commodity Futures Trading Commission ("CFTC")
and a member of the Financial Industry Regulatory Authority ("FINRA"), the National Futures Association
and the Securities Investor Protection Corporation ("SIPC"), primarily in connection with investment
banking-related services relating to insurance-linked and alternative risk financing transactions. Also in
the United States, Marsh uses the services of NIA Securities, LLC, a U.S. registered broker-dealer and
member of FINRA and SIPC. In the United Kingdom, Marsh and Guy Carpenter utilize the expertise of
MMC Securities (Europe) Limited, which is authorized and regulated by the FCA to provide advice on
securities and investments, including mergers & acquisitions in the European Union. MMC Securities
Corp., MMC Securities (Europe) Limited, NIA Securities, LLC, and Marsh Investment Services Limited are
indirect, wholly-owned subsidiaries of Marsh & McLennan Companies, Inc.
In some jurisdictions, insurance-related taxes may be due either directly from clients or from the
insurance broker. In the latter case, the broker customarily looks to the client for payment.
Consulting. Certain of Mercer's retirement-related consulting and investment services are subject to
pension law and financial regulation in many countries. In addition, the trustee services, investment
services (including advice to persons, institutions and other entities on the investment of pension assets
8
and assumption of discretionary investment management responsibilities) and retirement and employee
benefit program administrative services provided by Mercer and its subsidiaries and affiliates are also
subject to investment and securities regulations in various jurisdictions, including the SEC, the
Department of Labor and the CFTC in the United States, the FCA in the United Kingdom, the Central
Bank of Ireland, and the Australian Prudential Regulation Authority and the Australian Securities and
Investments Commission. In the United States, Mercer provides investment services through Mercer
Investment Management, Inc. and Mercer Investment Consulting, Inc., each a registered investment
adviser. Mercer Trust Company, a New Hampshire chartered trust bank, provides services for Mercer’s
benefits administration and investment management business in the United States. The benefits
insurance consulting and brokerage services provided by Mercer and its subsidiaries and affiliates are
subject to the same licensing requirements and regulatory oversight as the insurance market
intermediaries described above regarding our Risk and Insurance Services businesses. Mercer uses the
services of MMC Securities Corp. with the provision of certain retirement and employee benefit services.
Oliver Wyman Group uses the services of MMC Securities Corp. (in the United States) and MMC
Securities (Europe) Limited (in the European Union), primarily in connection with corporate finance
advisory services.
COMPETITIVE CONDITIONS
The Company faces strong competition in all of its businesses from providers of similar products and
services, including competition with regard to identifying and pursuing acquisition candidates. The
Company also encounters strong competition throughout its businesses from both public corporations
and private firms in attracting and retaining qualified employees. In addition to the discussion below, see
“Risks Relating to the Company Generally-Competitive Risks,” in Part I, Item 1A of this report.
Risk and Insurance Services. The Company's combined insurance and reinsurance services
businesses are global in scope. The principal bases upon which our insurance and reinsurance
businesses compete include the complexity, range, quality and cost of the services and products offered
to clients. The Company encounters strong competition from other insurance and reinsurance brokerage
firms that operate on a nationwide or worldwide basis, from a large number of regional and local firms in
the United States, the European Union and elsewhere, from insurance and reinsurance companies that
market, distribute and service their insurance and reinsurance products without the assistance of brokers
or agents and from other businesses, including commercial and investment banks, accounting firms,
consultants and web search engines, that provide risk-related services and products or alternatives to
traditional brokerage services.
Certain insureds and groups of insureds have established programs of self insurance (including captive
insurance companies) as a supplement or alternative to third-party insurance, thereby reducing in some
cases their need for insurance placements. Certain insureds also obtain coverage directly from insurance
providers. There are also many other providers of managing general agency, affinity programs and private
client services, including specialized firms, insurance companies and other institutions.
Consulting. The Company's consulting and HR outsourcing businesses face strong competition from
other privately and publicly held worldwide and national companies, as well as regional and local firms.
These businesses compete generally on the basis of the range, quality and cost of the services and
products provided to clients. Competitors include independent consulting and outsourcing firms, as well
as consulting and outsourcing operations affiliated with accounting, information systems, technology and
financial services firms.
Mercer's investments business faces competition from many sources, including multi-manager services
offered by other investment consulting firms and financial institutions. In many cases, clients have the
option of handling the services provided by Mercer and Oliver Wyman Group internally, without
assistance from outside advisors.
Segmentation of Activity by Type of Service and Geographic Area of Operation.
Financial information relating to the types of services provided by the Company and the geographic areas
of its operations is incorporated herein by reference to Note 16 to the consolidated financial statements
included under Part II, Item 8 of this report.
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Employees
As of December 31, 2014, the Company and its consolidated subsidiaries employed approximately
57,000 people worldwide, including approximately 30,800 in risk and insurance services, 24,300 in
consulting, and 1,700 individuals at the parent-company level.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are appointed annually by the Company’s Board of Directors. The
following individuals are the executive officers of the Company:
Peter J. Beshar, age 53, is Executive Vice President and General Counsel of Marsh & McLennan
Companies. In addition to managing the Company's Legal function, Mr. Beshar also oversees the
Company's Government Relations, Risk Management and Communications groups. Before joining Marsh
& McLennan Companies in November 2004, Mr. Beshar was a Litigation Partner in the law firm of
Gibson, Dunn & Crutcher LLP. Mr. Beshar joined Gibson, Dunn & Crutcher in 1995 after serving as an
Assistant Attorney General in the New York Attorney General's office and as the Special Assistant to
Cyrus Vance in connection with the peace negotiations in the former Yugoslavia.
J. Michael Bischoff, age 67, is the Company's Chief Financial Officer. Mr. Bischoff has held a number of
senior financial management positions with Marsh & McLennan Companies since joining the Company in
1982. In his most recent role as Vice President, Corporate Finance, Mr. Bischoff was responsible for
leading and directing the Company's Corporate Development, Mergers & Acquisitions, Treasury and
Investor Relations functions. His prior experience was with the Board of Governors of the Federal
Reserve System.
E. Scott Gilbert, age 59, is Senior Vice President and Chief Risk and Compliance Officer of Marsh &
McLennan Companies. In addition to managing the Company's Risk and Compliance function, Mr. Gilbert
also oversees the Company's Business Resiliency Management, Global Security and Global Technology
Infrastructure groups. Prior to joining Marsh & McLennan Companies in January 2005, he had been the
Chief Compliance Counsel of the General Electric Company since September 2004. Prior thereto, he was
Counsel, Litigation and Legal Policy at GE. Between 1986 and 1992, when he joined GE, he served as an
Assistant United States Attorney in the Southern District of New York.
Daniel S. Glaser, age 54, is President and Chief Executive Officer of Marsh & McLennan Companies.
Prior to assuming this role in January 2013, Mr. Glaser served as Group President and Chief Operating
Officer of Marsh & McLennan Companies from April 2011 through December 2012, with strategic and
operational oversight of both the Risk and Insurance Services and the Consulting segments of the
Company. Mr. Glaser rejoined Marsh in December 2007 as Chairman and Chief Executive Officer of
Marsh Inc. after serving in senior positions in commercial insurance and insurance brokerage in the
United States, Europe, and the Middle East. He began his career at Marsh over 30 years ago. Mr. Glaser
was named Chairman of the Federal Advisory Committee on Insurance (FACI) in August 2014. FACI,
which comprises experts from business, academia and consumer advocacy groups, as well as state
insurance regulators, was formed in 2011 to provide advice to the Federal Insurance Office. He also
serves on the International Advisory Board of BritishAmerican Business and is a member of the Board of
Trustees for The Institutes (American Institute for CPCU), the Insurance Information Institute and Ohio
Wesleyan University.
Laurie Ledford, age 57, is the Company's Senior Vice President and Chief Human Resources Officer.
Ms. Ledford is responsible for the firm's overall human capital and talent strategy and the delivery of
human resources services to all our colleagues worldwide. Prior to her current role, Ms. Ledford served
as Chief Human Resources Officer (CHRO) for Marsh Inc. Ms. Ledford joined Marsh in 2000 and was
named CHRO in 2006, after having served as Senior Human Resources Director for Marsh's International
Specialty Operations. Her prior experience was with Citibank and NationsBank.
Scott McDonald, age 48, is President and Chief Executive Officer of Oliver Wyman Group, a position he
assumed in January 2014. From 2012 to 2014, Mr. McDonald was President of Oliver Wyman. Previously,
Mr. McDonald was the Managing Partner of Oliver Wyman's Financial Services practice and has held a
number of senior positions, including the Global head of the Corporate & Institutional Banking practice.
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Mr. McDonald has 20 years of experience in financial services consulting. Before joining Oliver Wyman in
1995, he was an M&A investment banker with RBC Dominion Securities in Toronto.
Alexander S. Moczarski, age 59, is President and Chief Executive Officer of Guy Carpenter. In addition,
Mr. Moczarski is Chairman of Marsh & McLennan Companies International. In this role, Mr. Moczarski
oversees the Company's international strategy, as well as its group of Country Corporate Officers located
in regions around the world. Prior to being named Guy Carpenter CEO in April 2011, Mr. Moczarski was
President and CEO of the International Division of Marsh. Previously, he was CEO of Marsh Inc.’s
Europe, Middle East and Africa region. While at Marsh, Mr. Moczarski held several other roles, including
President and CEO of the firm’s International Specialty Operations and Region Head for the Latin
America and Caribbean Region. Before joining Marsh in 1993, Mr. Moczarski worked for AIG for nearly 15
years, most recently as CEO of the firm’s operations in Argentina and Chile.
Julio A. Portalatin, age 55, is President and Chief Executive Officer of Mercer. Prior to joining Mercer in
February 2012, Mr. Portalatin was the President and CEO of Chartis Growth Economies, and Senior Vice
President, American International Group (AIG). In that role, he had responsibility for operations in Asia
Pacific, South Asia, Latin America, Africa, the Middle East and Central Europe. Mr. Portalatin began his
career with AIG in 1993 and thereafter held a number of key leadership roles, including President of the
Worldwide Accident & Health Division at American International Underwriters (AIU) from 2002-2007. From
2007-2010, he served as President and CEO of Chartis Europe S.A. and Continental European Region,
based in Paris, before becoming President and CEO of Chartis Emerging Markets. Prior to joining AIG/
Chartis, Mr. Portalatin spent 12 years with Allstate Insurance Company in various executive product
underwriting, distribution and marketing positions.
Peter Zaffino, age 48, is President and Chief Executive Officer of Marsh. Prior to being named Marsh
CEO in 2011, Mr. Zaffino was President and Chief Executive Officer of Guy Carpenter, a position he
assumed in early 2008. Previously, he was an Executive Vice President of Guy Carpenter and had held a
number of senior positions, including Head of Guy Carpenter's U.S. Treaty Operations and Head of the
firm's Global Specialty Practices. Mr. Zaffino has over 25 years of experience in the Insurance and
Reinsurance industry. Prior to joining Guy Carpenter in 2001, he held several senior positions, most
recently serving in an executive role with a GE Capital portfolio company.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the Securities Exchange Act of
1934. In accordance with the Exchange Act, the Company files with the SEC annual reports on Form 10-
K, quarterly reports on Form 10-Q and current reports on Form 8-K. The Company makes these reports
and any amendments to these reports available free of charge through its website, www.mmc.com, as
soon as reasonably practicable after they are filed with, or furnished to, the SEC. The SEC also maintains
an Internet site at www.sec.gov that contains reports, proxy and information statements and other
information regarding issuers, like the Company, that file electronically with the SEC.
The Company also posts on its website the following documents with respect to corporate governance:
• Guidelines for Corporate Governance;
• Code of Conduct, The Greater Good;
• Procedures for Reporting Complaints and Concerns Regarding Accounting Matters; and
•
the charters of the Audit Committee, Compensation Committee, Corporate Responsibility
Committee and Directors and Governance Committee of the Company’s Board of Directors.
All of the above documents are available in printed form to any Company stockholder upon request. The
information on our website is not a part of, or incorporated by reference into, this report.
Item 1A. Risk Factors
You should consider the risks described below in conjunction with the other information presented in this
report. These risks have the potential to materially adversely affect the Company's business, results of
operations or financial condition.
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RISKS RELATING TO THE COMPANY GENERALLY
Legal and Regulatory Issues
We are subject to significant uninsured exposures arising from "errors and omissions" and
similar claims.
Our operating companies provide numerous professional services, including the placement of insurance
and the provision of consulting, actuarial and other services, to corporate and public clients around the
world. As a result of these activities, the Company and its subsidiaries are subject to a significant number
of errors and omissions, breach of fiduciary duty and similar claims, which we refer to collectively as
"E&O claims". In our Risk and Insurance Services segment, such claims include allegations of damages
arising from our failure to adequately place coverage or notify insurers of potential claims on behalf of
clients. In our Consulting segment, such claims include allegations of damages arising from our actuarial,
consulting, investments, pension administration and other services, which frequently involve (1)
assumptions and estimates concerning contingent future events, (2) drafting and interpretation of
complex documentation governing pension plans, (3) calculating benefits within complex pension
structures and (4) the provision of investment advice and management of client assets. Given the long-tail
nature of professional liability claims, these matters often relate to services provided by the Company
dating back many years. Such claims may seek damages, including punitive and treble damages, in
amounts that could, if awarded, be significant and subject us to liability for monetary damages, negative
publicity and reputational harm and divert personnel and management resources. The Company has
varying levels of third-party insurance coverage, with policy limits and coverage terms varying significantly
by policy year.
In establishing liabilities for E&O claims in accordance with FASB ASC Subtopic No. 450-20
(Contingencies-Loss Contingencies), the Company utilizes case level reviews by inside and outside
counsel, an internal actuarial analysis and other analysis to estimate potential losses. A liability is
established when a loss is both probable and reasonably estimable. The liability is reviewed quarterly and
adjusted as developments warrant. In many cases, the Company has not recorded a liability, other than
for legal fees to defend the claim, because we are unable, at the present time, to make a determination
that a loss is both probable and reasonably estimable. Nevertheless, given the unpredictability of E&O
claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular
matter could have a material adverse effect on the Company's business, results of operations, financial
condition or cash flow in a given quarterly or annual period.
Further, and as more fully described in Note 15 to our consolidated financial statements included under
Part II, Item 8 of this report, we are subject to legal proceedings, regulatory investigations and other
contingencies other than E&O claims which, if determined unfavorably to us, could have a material
adverse effect on our business, results of operations or financial condition.
We cannot guarantee that we are or will be in compliance with all current and potentially
applicable U.S. federal and state or foreign laws and regulations, and actions by regulatory
authorities or changes in legislation and regulation in the jurisdictions in which we operate could
have a material adverse effect on our business.
Our activities are subject to extensive regulation under the laws of the United States and its various
states, the European Union and its member states and the other jurisdictions in which we operate. For
example, we are subject to regulation by foreign and domestic governments, regulatory agencies such as
the SEC in the United States and the FCA in the United Kingdom and self-regulatory organizations such
as FINRA, as further described above under Part I, Item 1 - Business (Regulation) of this report. The
foreign and U.S. laws and regulations applicable to our operations are complex and may increase the
costs of regulatory compliance, limit or restrict the products or services we sell or subject our business to
the possibility of regulatory actions or proceedings. These laws and regulations include trade sanctions
laws relating to countries such as Cuba, Iran, Russia, Sudan and Syria, anti-corruption laws such as the
U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar local laws prohibiting corrupt
payments to governmental officials and the Foreign Account Tax Compliance provisions of the Hiring
Incentives to Restore Employment Act in the U.S., as well as import and export restrictions. As discussed
in more detail below, they also include laws and regulations related to data privacy and cyber security.
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We are subject to additional federal, state and other rules and regulations, including those required by the
Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Compliance with the requirements of these laws and regulations, among others, may be costly and could
adversely affect our business.
While we attempt to comply with all applicable laws and regulations, there can be no assurance that we,
our employees, our consultants or our contractors are in full compliance with all applicable laws and
regulations or interpretations of these laws and regulations at all times or that we will be able to comply
with any future laws or regulations. If we fail to comply with applicable laws and regulations, including
those referred to above, we may be subject to investigations, criminal penalties or civil remedies,
including fines, injunctions, loss of an operating license or approval, increased scrutiny or oversight by
regulatory authorities, the suspension of individual employees, limitations on engaging in a particular
business or redress to clients. The cost of compliance or the consequences of non-compliance could
have a material adverse effect on our business, results of operations or financial condition. In addition,
these matters could have a material adverse effect on the Company by exposing us to negative publicity
and reputational damage or by harming our client or employee relationships.
In most jurisdictions, government regulatory authorities have the power to interpret or amend applicable
laws and regulations, and have discretion to grant, renew and revoke various licenses and approvals we
need to conduct our activities. Such authorities may require the Company to incur substantial increases in
costs in order to comply with such laws and regulations. In some areas of our businesses, we act on the
basis of our own or the industry's interpretations of applicable laws or regulations, which may conflict from
state to state or country to country. In the event those interpretations eventually prove different from the
interpretations of regulatory authorities, we might be penalized or precluded from carrying on our previous
activities. Moreover, the laws and regulations to which we are subject may conflict among the various
jurisdictions and countries in which we operate, which could increase the likelihood of our businesses
being non-compliant in one or more jurisdictions.
The method by which insurance intermediaries are compensated has received substantial scrutiny from
regulators in the past because of the potential for conflicts of interest. The potential for conflicts of interest
arises when an intermediary is compensated by two parties in connection with the same or similar
transactions. The vast majority of the compensation that Marsh receives is in the form of retail
commissions and fees. The amount of compensation that we receive from insurance companies,
separate from retail commissions and fees, has increased significantly in the last several years. This
compensation includes, among other things, payment for consulting and analytics services provided to
insurers; administrative and other services provided to or on behalf of insurers (including services relating
to the administration and management of quota shares, panels and other facilities in which insurers
participate); and contingent commissions in parts of our operations. Future changes in the regulatory
environment may impact our ability to collect these revenue streams. In addition, these revenues present
potential regulatory, litigation and reputational risks that may arise from alleged conflicts of interest or
allegations under antitrust, competition and other laws. Adverse regulatory, legal or other developments
regarding these revenues could have a material adverse effect on our business, results of operations or
financial condition, expose us to negative publicity and reputational damage and harm our client, insurer
or other relationships.
Finally, government involvement in the insurance or reinsurance markets could displace insurance or
reinsurance currently available from the private market and adversely affect our business, results of
operations or financial condition.
Improper disclosure of confidential, personal or proprietary data, whether due to human error,
misuse of information by employees or vendors or as a result of cyberattacks, could result in
regulatory scrutiny, legal liability or reputational harm, and could have a material adverse effect
on our business.
We maintain confidential, personal and proprietary information relating to our company, our employees,
our clients and their employees and other third parties. This information includes personally identifiable
information, protected health information and financial information.
Confidential, personal and proprietary information is subject to the risk that it will be improperly disclosed
or misused, either as a result of human error or improper action by employees, vendors or third parties,
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including through a cyberattack. The age of some of our technology, as well as the expansion of and
increased use of mobile devices, online and "cloud"-based services and social media tools by employees,
clients and third parties, and the speed at which information can be widely distributed, all contribute to an
increased risk of intentional or unintentional distribution or misuse of such information. In addition, across
our global operations, we have a significant number of third-party vendors who have direct access to our
systems or receive a significant amount of confidential, personal or proprietary information from us. As a
result, we are also at risk of a data incident involving a vendor, including due to the breakdown of a
vendor’s data protection processes or a cyberattack on a vendor’s systems.
In many jurisdictions around the world, we are increasingly subject to new or changing laws, rules and
regulations relating to the collection, use, transfer, retention, security and management of such
information. These laws impose, among other things, restrictions on cross-border transfers, stringent
operational requirements, breach notification obligations and, in some jurisdictions, significant penalties
for non-compliance. These evolving laws and regulations impose significant technology and compliance
costs on us. Our failure to adhere to legal or regulatory requirements in this area could result in legal
liability or damage to our reputation, as well as the risks described elsewhere herein relating to our
compliance systems and controls.
We have, to date, experienced data incidents involving confidential, personal and proprietary information,
including breaches resulting from human error, as well as employees or vendors misusing such
information and unauthorized persons gaining access to our systems. To date, these incidents have not
had a material adverse effect on our business or operations. In the future, however, such incidents could
disrupt our business, damage our reputation and subject us to significant legal liability. The costs
associated with such incidents could be substantial and could exceed any coverage available under our
insurance policies.
We engage in periodic testing and maintain policies, procedures and technical safeguards designed to
protect the security and privacy of confidential, personal and proprietary information. However, our testing
efforts may not discover all system deficiencies, and we may not be able to fully remediate any
discovered deficiencies in a timely manner. Similarly, our policies, procedures and technical safeguards
may be insufficient to prevent improper access to or disclosure or misuse of confidential, personal or
proprietary information. We also may be unable to detect an incident, assess the severity or impact of an
incident or appropriately respond to an incident in a timely manner.
Significant costs are involved with maintaining safeguards for our technology infrastructure. If we are
unable to efficiently and effectively maintain and upgrade these safeguards, including in connection with
the integration of acquisitions, we could incur unexpected costs and certain of our systems could become
more vulnerable, which could have a material adverse effect on our business.
Improper access to or use or disclosure of confidential, personal or proprietary information could harm our
reputation and subject us to liability under our contracts, as well as under existing or future laws, rules
and regulations, resulting in increased legal and other costs, harm to our reputation and disruption of our
business.
Financial Risks
Our pension obligations could cause the Company's financial position, earnings and cash flows
to fluctuate.
The Company has significant pension obligations to its current and former employees, totaling
approximately $15.9 billion, and related plan assets of approximately $14.9 billion, at December 31, 2014.
The Company's policy for funding its tax-qualified defined benefit retirement plans is to contribute
amounts at least sufficient to meet the funding requirements set forth by U.S. law and the laws of the non-
U.S. jurisdictions in which the Company offers defined benefit plans. In the U.S., contributions to the tax-
qualified defined benefit plans are based on ERISA guidelines. Contribution rates for non-U.S. plans are
generally based on local funding practices and statutory requirements, which may differ from
measurements under U.S. GAAP. In the U.K., for example, contributions to defined benefit pension plans
are based on statutory requirements and are determined through a negotiation process between the
Company and the plans' trustee that typically occurs every three years in conjunction with the actuarial
valuation of the plans. This negotiation process is governed by U.K. pension regulations. Certain of the
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assumptions that result from the funding negotiations are different from those used for U.S. GAAP and
currently result in a lower funded status than under U.S. GAAP.
During 2014, the Company contributed $25 million to its U.S. pension plans and $156 million to its
non-U.S. pension plans. The calculations relating to our defined benefit pension plans are complex. As
indicated in Note 8 to our consolidated financial statements, pension plan assets and liabilities, periodic
pension expense and future funding amounts are impacted by future asset performance, the assumed
interest rates we use to discount our pension liabilities, rates of inflation, mortality assumptions and other
variables. Given the magnitude of our worldwide pension plans, variations in or reassessment of the
preceding factors or potential miscalculations relating to our defined benefit pension plans could cause
significant fluctuation from year to year in our earnings and cash flow, as well as our pension plan assets,
liabilities and equity, and may result in increased levels of contributions to our pension plans.
Our results of operations could be adversely affected by economic and political conditions and
the effects of these conditions on our clients' businesses and levels of business activity.
Global economic and political conditions affect our clients' businesses and the markets they serve. These
economic conditions may reduce demand for our services or depress pricing of those services, which
could have a material adverse effect on our results of operations. Changes in global economic conditions
could also shift demand to services for which we do not have competitive advantages, and this could
negatively affect the amount of business that we are able to obtain. Should it become necessary for us to
restructure our business, including reducing our work force, as a result of market conditions or other
factors that reduce the demand for our products and services, our ability to execute our business strategy
could be adversely affected.
Our cash investments, including those held in a fiduciary capacity, are subject to general credit, liquidity,
counterparty, market and interest rate risks that may be exacerbated by the difficulties faced by financial
institution counterparties. If the banking system or the fixed income, credit or equity markets deteriorate,
the value and liquidity of our investments could be adversely affected.
Our significant non-U.S. operations expose us to exchange rate fluctuations and various risks that
could impact our business.
We are subject to exchange rate movement because some of our subsidiaries receive revenue other than
in their functional currencies and because we must translate the financial results of our foreign
subsidiaries into U.S. dollars. Our U.S. operations earn revenue and incur expenses primarily in U.S.
dollars. In certain jurisdictions, however, our Risk and Insurance Services operations generate revenue in
a number of different currencies, but expenses are almost entirely incurred in local currency. Due to
fluctuations in foreign exchange rates, we are subject to economic exposure as well as currency
translation exposure on the profits of our operations. Because the non-U.S. based revenue that is
exposed to foreign exchange fluctuations is approximately 55% of total revenue, exchange rate
movement could have a significant impact on our business, financial condition, results of operations or
cash flow. For additional discussion, see "Market Risk and Credit Risk–Foreign Currency Risk" in Part II,
Item 7A ("Quantitative and Qualitative Disclosures about Market Risk") of this report.
Increased counterparty risk, changes in interest rates and other market developments could
reduce the value of our investment portfolio and adversely affect our financial results.
During times of stress in the banking industry, counterparty risk can quickly escalate, potentially resulting
in substantial trading and investment losses for corporate and other investors. In addition, we may incur
investment losses as a result of unusual and unpredictable market developments, and we may continue
to experience reduced investment earnings if the yields on investments deemed to be low risk remain at
or near their current low levels.
We are a holding company and may not be able to receive dividends or other distributions in
needed amounts from our subsidiaries.
The Company is organized as a holding company, a legal entity separate and distinct from our operating
subsidiaries. As a holding company without significant operations of our own, we are dependent upon
dividends and other payments from our operating subsidiaries to meet our obligations for paying principal
and interest on outstanding debt obligations, for paying dividends to stockholders and for corporate
15
expenses. In the event our operating subsidiaries are unable to pay sufficient dividends and make other
payments to the Company, we may not be able to service our debt, pay our obligations or pay dividends
on our common stock.
Further, the Company derives a significant portion of its revenue and operating profit from operating
subsidiaries located outside the U.S. Since the majority of financing obligations as well as dividends to
stockholders are paid from the U.S., it is important to be able to access the cash generated by our
operating subsidiaries outside the U.S. Funds from the Company's operating subsidiaries outside the U.S.
are regularly repatriated to the U.S. via stockholder distributions and intercompany financings. A number
of factors may arise that could limit our ability to repatriate funds or make repatriation cost prohibitive,
including, but not limited to, foreign exchange rates and tax-related costs.
In the event we are unable to generate cash from our operating subsidiaries for any of the reasons
discussed above, our overall liquidity could deteriorate.
Credit rating downgrades would increase our financing costs and could subject us to operational
risk.
Currently, the Company's senior debt is rated Baa1 by Moody's and A- by S&P. The ratings from both
Moody's and S&P currently carry a Stable outlook.
If we need to raise capital in the future (for example, in order to fund maturing debt obligations or finance
acquisitions or other initiatives), credit rating downgrades would increase our financing costs, and could
limit our access to financing sources. Further, we believe that a downgrade to a rating below investment-
grade could result in greater operational risks through increased operating costs and increased
competitive pressures.
Our quarterly revenues and profitability may fluctuate significantly.
Quarterly variations in revenues and operating results may occur due to several factors. These include:
•
•
•
•
the significance of client engagements commenced and completed during a quarter;
the possibility that clients may decide to delay or terminate a current or anticipated
project as a result of factors unrelated to our work product or progress;
fluctuations in hiring and utilization rates and clients' ability to terminate engagements
without penalty;
seasonality due to the impact of regulatory deadlines, policy renewals and other timing
factors to which our clients are subject;
the success of our acquisitions or investments;
•
• macroeconomic factors such as changes in foreign exchange rates, interest rates and
global securities markets, particularly in the case of Mercer, where fees in certain
business lines are derived from the value of assets under management or administration;
and
general economic conditions, since results of operations are directly affected by the
levels of business activity of our clients, which in turn are affected by the level of
economic activity in the industries and markets that they serve.
•
A significant portion of our total operating expenses is relatively fixed in the short term. Therefore, a
variation in the number of client assignments or in the timing of the initiation or the completion of client
assignments can cause significant variations in quarterly operating results for these businesses.
If we are unable to collect our receivables, our results of operations and cash flows could be
adversely affected.
Our business depends on our ability to successfully obtain payment from our clients of the amounts they
owe us for our work performed. Accounts receivable typically total about one-quarter of our total annual
revenues. In most cases, we bill and collect on relatively short cycles. There is no guarantee that we will
accurately assess the creditworthiness of our clients. Macroeconomic conditions could result in financial
difficulties for our clients, which could cause clients to delay payments to us, request modifications to their
payment arrangements that could increase our receivables balance, or default on their payment
obligations to us. Timely collection of client balances also depends on our ability to complete our
contractual commitments and bill and collect our contracted revenues. If we are unable to meet our
16
contractual requirements, we might experience delays in collection of, or be unable to collect, our client
balances, and if this occurs, our results of operations and cash flows could be adversely affected. In
addition, if we experience an increase in the time it takes to bill and collect for our services, our cash
flows could be adversely affected.
Market perceptions concerning the instability of the Euro could adversely affect the Company's
operating results as well as the value of the Company's Euro-denominated assets.
Concerns persist regarding the ability of certain Eurozone countries to service their debt obligations. As a
result, a number of these countries have undertaken a variety of actions, such as cutting spending and
raising taxes, designed to ease their future debt burdens. A potential consequence may be stagnant
growth, or even recession, in the Eurozone economies and beyond. Any of these developments could
lead to further contraction in the Eurozone economies, adversely affecting our operating results in the
region. The Company may also face increased credit risk as our clients and financial institution
counterparties in the region find themselves with reduced resources to meet their obligations. Finally, the
value of the Company's assets held in the Eurozone, including cash holdings, will decline if the currency
devalues.
Global Operations
We are exposed to multiple risks associated with the global nature of our operations.
We do business worldwide. In 2014, 55% of the Company's total revenue was generated from operations
outside the United States, and over one-half of our employees are located outside the United States. We
expect to expand our non-U.S. operations further.
The geographic breadth of our activities subjects us to significant legal, economic, operational, market,
compliance and reputational risks. These include, among others, risks relating to:
economic and political conditions in foreign countries;
unexpected increases in taxes or changes in U.S. or foreign tax laws;
•
•
• withholding or other taxes that foreign governments may impose on the payment of
dividends or other remittances to us from our non-U.S. subsidiaries;
potential transfer pricing-related tax exposures that may result from the allocation of U.S.-
based costs that benefit our non-U.S. businesses;
potential conflicts of interest that may arise as we expand the scope of our businesses
and our client base;
international hostilities, terrorist activities, natural disasters and infrastructure disruptions;
local investment or other financial restrictions that foreign governments may impose;
potential costs and difficulties in complying with a wide variety of foreign laws and
regulations (including tax systems) administered by foreign government agencies, some
of which may conflict with U.S. or other sources of law;
potential costs and difficulties in complying, or monitoring compliance, with foreign and
U.S. laws and regulations that are applicable to our operations abroad, including trade
sanctions laws relating to countries such as Cuba, Iran, Russia, Sudan and Syria, anti-
corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act
2010, local laws prohibiting corrupt payments to governmental officials, as well as import
and export restrictions;
limitations or restrictions that foreign or U.S. legislative bodies or regulators may impose
on the products or services we sell or the methods by which we sell our products and
services;
limitations that foreign governments may impose on the conversion of currency or the
payment of dividends or other remittances to us from our non-U.S. subsidiaries;
the length of payment cycles and potential difficulties in collecting accounts receivable;
engaging and relying on third parties to perform services on behalf of the Company; and
potential difficulties in monitoring employees in geographically dispersed locations.
•
•
•
•
•
•
•
•
•
•
•
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Our inability to successfully recover should we experience a disaster or other business continuity
problem could cause material financial loss, loss of human capital, regulatory actions,
reputational harm or legal liability.
Should we experience a local or regional disaster or other business continuity problem, such as an
earthquake, hurricane, flood, terrorist attack, pandemic, security breach, cyber attack, power loss,
telecommunications failure or other natural or man-made disaster, our ability to continue to operate will
depend, in part, on the availability of our personnel, our office facilities and the proper functioning of our
computer, telecommunication and other related systems and operations. In such an event, we could
experience operational challenges with regard to particular areas of our operations, such as key
executive officers or personnel, that could have a material adverse effect on our business.
Our operations are dependent upon our ability to protect our technology infrastructure against damage
from events that could have a significant disruptive effect on our operations. We could potentially lose
client data or experience material adverse interruptions to our operations or delivery of services to our
clients in a disaster recovery scenario.
We regularly assess and take steps to improve our existing business continuity plans and key
management succession. However, a disaster on a significant scale or affecting certain of our key
operating areas within or across regions, or our inability to successfully recover should we experience a
disaster or other business continuity problem, could materially interrupt our business operations and
result in material financial loss, loss of human capital, regulatory actions, reputational harm, damaged
client relationships or legal liability.
Competitive Risks
Each of the Company's businesses operates in a highly competitive environment. If we fail to
compete effectively against our competitors, some of which have lower effective tax rates, our
business, results of operations and financial condition will be impacted adversely.
As a global professional services firm, the Company faces acute and continuous competition in each of its
operating segments. Our ability to compete successfully depends on a variety of factors, including the
quality and expertise of our colleagues, our geographic reach, the sophistication and quality of our
services, our pricing relative to competitors and our customers' ability to self-insure or utilize internal
resources instead of consultants. If we are unable to respond successfully to the competition we face, our
business, results of operations and financial condition will be adversely impacted.
In addition, given the global breadth of our operations, the Company derives a significant portion of its
revenue and operating profit from operating subsidiaries located outside the United States. Funds from
the Company's operating subsidiaries located outside the U.S. are regularly repatriated to the United
States out of annual earnings to pay dividends to stockholders, fund share repurchases and for other
corporate purposes. The Company's consolidated tax rate is higher than a number of its key competitors
that are domiciled outside the United States where corporate tax rates are lower than the U.S. statutory
tax rate. The higher consolidated tax rate at which our earnings are taxed could have an adverse impact
on our ability to compete with a number of our competitors.
In our Risk and Insurance Services segment, in addition to the challenges posed by capital market
alternatives to traditional insurance and reinsurance, we compete intensely against a wide range of other
insurance and reinsurance brokerage firms that operate on a global, regional, national or local scale for
both client business and employee talent. We compete as well with insurance and reinsurance companies
that market and service their insurance products without the assistance of brokers or other market
intermediaries, and with various other companies that provide risk-related services or alternatives to
traditional brokerage services. This competition is intensified by an industry trend toward a “syndicated”
or “distributed” approach to the purchase of insurance and reinsurance brokerage services, whereby a
client engages multiple brokers to service different portions of the client's account.
In our Consulting segment, we compete for business and employee talent with numerous consulting firms
and organizations affiliated with accounting, information systems, technology and financial services firms
around the world. Through these affiliations, such competitors may be able to offer more comprehensive
coverage to potential clients.
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The loss of key professionals could hurt our ability to retain existing client revenues and generate
revenues from new business.
Across all of our businesses, our colleagues are critical to developing and retaining the client
relationships performing the service on which our revenues depend. It is therefore important for us to
retain significant revenue-producing employees and the key managerial and other professionals who
support them. We face numerous challenges in this regard, including the intense competition for talent in
all of our businesses and the general mobility of professionals in our businesses.
Losing employees who manage or support substantial client relationships or possess substantial
experience or expertise could adversely affect our ability to secure and complete client engagements,
which could adversely affect our results of operations. And, subject to applicable restrictive covenants, if
any of our key professionals were to join an existing competitor or form a competing company, some of
our clients could choose to use the services of that competitor instead of our services.
Our businesses face rapid technological changes and our failure to adequately anticipate or
respond to these changes or to successfully implement strategic initiatives to address them could
adversely affect our business and results of operations.
To remain competitive in many of our business areas, we must identify the most current technologies and
methodologies and integrate them into our service offerings. We also have a number of strategic
initiatives involving investments in technology systems and infrastructure to support our growth strategy.
In addition to new platforms and systems, we are deploying new processes and many of our colleagues
across the business are changing the way they perform certain roles to capture efficiencies. If we do not
keep up with technological changes or execute well on our strategic initiatives, our business and results
of operations could be adversely impacted.
Consolidation in the industries we serve could adversely affect our business.
Companies in the industries that we serve may seek to achieve economies of scale and other synergies
by combining with or acquiring other companies. If two or more of our current clients merge
or consolidate and combine their operations, it may decrease the amount of work that we perform for
these clients. If one of our current clients merges or consolidates with a company that relies on another
provider for its services, we may lose work from that client or lose the opportunity to gain additional work.
Any of these or similar possible results of industry consolidation could adversely affect our business. Guy
Carpenter is especially susceptible to this risk given the limited number of insurance company clients and
reinsurers in the marketplace.
Acquisitions and Dispositions
We face risks when we acquire and dispose of businesses.
We have a history of making acquisitions, including a total of 71 acquisitions in the period 2009-2014 for
aggregate purchase consideration of $3.0 billion. We have also exited various businesses, including the
sale of Kroll in 2010. We expect that acquisitions will continue to be a key part of our business strategy.
Our success in this regard will depend on our ability to identify and compete for appropriate acquisition
candidates and to complete with favorable results the transactions we decide to pursue.
While we intend that our acquisitions will improve our competitiveness and profitability, we cannot be
certain that our past or future acquisitions will be accretive to earnings or otherwise meet our operational
or strategic expectations. Acquisitions involve special risks, including accounting, regulatory, compliance,
information technology or human resources issues that could arise in connection with, or as a result of,
the acquisition of the acquired company; the assumption of unanticipated liabilities and contingencies;
difficulties in integrating acquired businesses; and the inability of acquired businesses to achieve the
levels of revenue, profit or productivity we anticipate or otherwise perform as we expect. In addition, if in
the future, the performance of our reporting units or an acquired business varies from our projections or
assumptions, or estimates about future profitability of our reporting units or an acquired business change,
the estimated fair value of our reporting units or an acquired business could change materially and could
result in an impairment of goodwill and other acquisition-related intangible assets recorded on our
balance sheet or in adjustments in contingent payment amounts. As of December 31, 2014, the
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Company's consolidated balance sheet reflected $7.9 billion of goodwill and intangible assets,
representing approximately 44% of the Company's total consolidated assets and allocated by reporting
segment as follows: Risk and Insurance Services, $5.6 billion and Consulting, $2.3 billion. Given the
significant size of the Company's goodwill and intangible assets, an impairment could have a material
adverse effect on our results of operations in any given period.
When we dispose of businesses, we are subject to the risk, contractually agreed or otherwise, of post-
transaction liabilities. For example, as described in Note 15 to our consolidated financial statements
included under Part II, Item 8 of this report, we have retained certain contingent litigation liabilities relating
to Kroll.
RISKS RELATING TO OUR RISK AND INSURANCE SERVICES SEGMENT
Our Risk and Insurance Services segment, conducted through Marsh and Guy Carpenter, represented
54% of the Company's total revenue in 2014. Our business in this segment is subject to particular risks.
Results in our Risk and Insurance Services segment may be adversely affected by a general
decline in economic activity.
Demand for many types of insurance and reinsurance generally rises or falls as economic growth
expands or slows. This dynamic affects the level of commissions and fees generated by Marsh and Guy
Carpenter. To the extent our clients become adversely affected by declining business conditions, they
may choose to limit their purchases of insurance and reinsurance coverage, as applicable, which would
inhibit our ability to generate commission revenue. Also, the insurance they seek to obtain through us
may be impacted by changes in their assets, property values, sales or number of employees, which may
reduce our commission revenue, and they may decide not to purchase our risk advisory services, which
would inhibit our ability to generate fee revenue. Moreover, insolvencies and combinations associated
with an economic downturn, especially insolvencies and combinations in the insurance industry, could
adversely affect our brokerage business through the loss of clients or by hampering our ability to place
insurance and reinsurance business. Guy Carpenter is especially susceptible to this risk given the limited
number of insurance company clients and reinsurers in the market place.
Volatility or declines in premiums and other market trends may significantly impede our ability to
improve revenues and profitability.
A significant portion of our Risk and Insurance Services revenue consists of commissions paid to us out
of the premiums that insurers and reinsurers charge our clients for coverage. Our revenues and
profitability are subject to change to the extent that premium rates fluctuate or trend in a particular
direction. The potential for changes in premium rates is significant, due to the general phenomenon of
pricing cyclicality in the commercial insurance and reinsurance markets.
In addition to movements in premium rates, our ability to generate premium-based commission revenue
may be challenged by the growing availability of alternative methods for clients to meet their risk-
protection needs. This trend includes a greater willingness on the part of corporations to “self-insure,” the
use of so-called “captive” insurers, and the advent of capital markets-based solutions to traditional
insurance and reinsurance needs. Further, the profitability of our Risk and Insurances Services segment
depends in part on our ability to be compensated, not only for insurance and reinsurance transactions,
but also for the increasing analytical services and advice that we provide. If we are unable to achieve and
maintain adequate billing rates for all of our services, our margins and profitability could decline.
RISKS RELATING TO OUR CONSULTING SEGMENT
Our Consulting segment, conducted through Mercer and Oliver Wyman Group, represented 46% of our
total revenue in 2014. Our businesses in this segment are subject to particular risks.
Demand for our services might decrease for various reasons, including a general economic
downturn, a decline in a client's or an industry's financial condition, or changes in government
regulation.
Global economic conditions over the past several years have resulted in negative impacts on businesses
and financial institutions. Many of our clients, including financial institutions, corporations, governmental
20
entities and pension plans, have been reducing expenses, including amounts spent on consulting
services. The evolving needs or financial circumstances of our clients may challenge our ability to
increase revenues and profitability and may reduce demand for our services. If the economy or markets
in which we operate experience continued weakness at current levels or deteriorate further, our business,
financial condition and results of operations could be materially and adversely affected.
In addition, demand for many of Mercer's benefits services is affected by government regulation and tax
rules, which drive our clients' needs for benefits-related services. For example, significant changes in
government regulations affecting the value, use or delivery of benefits and human resources programs,
including changes in regulations relating to health and welfare plans, defined contribution plans, or
defined benefit plans, may adversely affect the demand for or profitability of Mercer's services.
Some segments of Mercer's investments business generate fees based upon the amount of client assets
to which Mercer provides services across multiple asset classes. As such, significant and negative
movements in global markets may reduce revenue generated by asset-based fees.
Factors impacting defined benefit pension plans and the services we provide relating to those
plans could adversely affect Mercer.
Mercer currently provides corporate, multi-employer and public clients with actuarial, consulting and
administration services relating to defined benefit pension plans. The nature of our work is complex. Our
actuarial services involve numerous assumptions and estimates regarding future events, including
interest rates used to discount future liabilities, estimated rates of return for a plan's assets, healthcare
cost trends, salary projections and participants' life expectancies. Our consulting services involve the
drafting and interpretation of trust deeds and other complex documentation governing pension plans. Our
administration services include calculating benefits within complicated pension plan structures. Clients
dissatisfied with our services have brought, and may bring, significant claims against us, particularly in the
U.S. and the U.K. In addition, a number of Mercer's clients have frozen or curtailed their defined benefit
plans and have moved to defined contribution plans resulting in reduced revenue for Mercer's retirement
business. These developments could adversely affect Mercer's business and operating results.
Our profitability may decline if we are unable to achieve or maintain adequate utilization and
pricing rates for our consultants.
The profitability of our Consulting businesses depends in part on ensuring that our consultants maintain
adequate utilization rates (i.e., the percentage of our consultants' working hours devoted to billable
activities). Our utilization rates are affected by a number of factors, including:
•
•
•
•
•
•
•
•
•
our ability to transition consultants promptly from completed projects to new assignments,
and to engage newly-hired consultants quickly in revenue-generating activities;
our ability to continually secure new business engagements, particularly because a
portion of our work is project-based rather than recurring in nature;
our ability to forecast demand for our services and thereby maintain appropriate
headcount in each of our geographies and workforces;
our ability to manage attrition;
unanticipated changes in the scope of client engagements;
the potential for conflicts of interest that might require us to decline client engagements
that we otherwise would have accepted;
our need to devote time and resources to sales, training, professional development and
other non-billable activities;
the potential disruptive impact of acquisitions and dispositions; and
general economic conditions.
If the utilization rate for our consulting professionals declines, our profit margin and profitability could
decline.
In addition, the profitability of our Consulting businesses depends in part on the prices we are able to
charge for our services. The prices we charge are affected by a number of factors, including:
clients' perception of our ability to add value through our services;
•
• market demand for the services we provide;
21
•
•
•
•
our ability to develop new services and the introduction of new services by competitors;
the pricing policies of our competitors;
the extent to which our clients develop in-house or other capabilities to perform the
services that they might otherwise purchase from us; and
general economic conditions.
If we are unable to achieve and maintain adequate billing rates for our services, our profit margin and
profitability could decline.
22
Item 1B. Unresolved Staff Comments.
There are no unresolved comments to be reported pursuant to Item 1B.
Item 2. Properties.
Marsh & McLennan Companies maintains its corporate headquarters in New York City. We also maintain
other offices around the world, primarily in leased space. In certain circumstances we may have space
that we sublet to third parties, depending upon our needs in particular locations.
Marsh & McLennan Companies and certain of its subsidiaries own, directly and indirectly through special
purpose subsidiaries, a 58% condominium interest covering approximately 900,000 square feet of office
space in a 44-story building in New York City. This real estate serves as the Company's headquarters and
is occupied primarily by the Company and its subsidiaries for general corporate use. The remaining
condominium interests in this property are owned by unaffiliated third parties. The Company’s owned
interest is financed by a 30-year loan that is non-recourse to the Company (except in the event of certain
prohibited actions) and secured by a first mortgage lien on the condominium interest and a first priority
assignment of leases and rents. In the event (1) the Company is downgraded below B (stable outlook) by
S&P or Fitch or B2 (stable outlook) by Moody’s or (2) an event of default under the loan has occurred and
is continuing, the Company would be obligated to pay rent for the entire occupancy of the mortgaged
property, which would, in effect, pay the mortgage.
Item 3. Legal Proceedings.
Information regarding legal proceedings is set forth in Note 15 to the consolidated financial statements
appearing under Part II, Item 8 (“Financial Statements and Supplementary Data”) of this report.
Item 4. Mine Safety Disclosures.
Not applicable.
23
PART II
Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
For information regarding dividends paid and the number of holders of the Company’s common stock, see
the table entitled “Selected Quarterly Financial Data and Supplemental Information (Unaudited)” below on
the last page of Part II, Item 8 (“Financial Statements and Other Supplementary Data”) of this report.
The Company’s common stock is listed on the New York, Chicago and London Stock Exchanges. The
following table indicates the high and low prices (NYSE composite quotations) of the Company’s common
stock during 2014 and 2013 and each quarterly period thereof:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Full Year
2014
Stock Price Range
2013
Stock Price Range
High
$50.48
$52.39
$53.64
$58.74
$58.74
Low
$44.25
$46.78
$50.09
$48.66
$44.25
High
$38.00
$41.68
$44.63
$48.56
$48.56
Low
$34.43
$37.00
$39.96
$41.98
$34.43
On February 20, 2015, the closing price of the Company’s common stock on the NYSE was $57.13.
In May 2014, the Board of Directors of the Company authorized share repurchases up to a dollar value of
$2 billion of the Company's common stock. The Company repurchased 3.7 million shares of its common
stock for $200 million during the fourth quarter of 2014, resulting in full year 2014 repurchases of 15.5
million shares for $800 million. The Company remains authorized to repurchase shares of its common
stock up to a dollar value of approximately $1.3 billion. There is no time limit on the authorization.
(c)
Total Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans
or Programs
2,057,060 $
943,849 $
744,094 $
3,745,003 $
(d)
Maximum Number
(or Approximate
Dollar Value)
of Shares (or
Units) that May
Yet Be Purchased
Under the Plans or
Programs
1,442,745,805
1,389,910,365
1,347,246,694
1,347,246,694
(a)
Total Number
of Shares
(or Units)
Purchased
(b)
Average Price
Paid per Share
(or Unit)
2,057,060 $
943,849 $
744,094 $
3,745,003 $
50.7992
55.9787
57.3364
53.4035
Period
Oct 1-31, 2014
Nov 1-30, 2014
Dec 1-31, 2014
Total Q4 2014
24
Item 6. Selected Financial Data.
Marsh & McLennan Companies, Inc. and Subsidiaries
FIVE-YEAR STATISTICAL SUMMARY OF OPERATIONS
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense:
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income (a)
Interest Income
Interest Expense
Cost of Extinguishment of Debt
Investment Income
Income Before Income Taxes
Income Tax Expense
Income From Continuing Operations
Discontinued Operations, Net of Tax
Net Income Before Non-Controlling Interests
Less: Net Income Attributable to Non-
Controlling Interests
Net Income Attributable to the Company
Basic Net Income Per Share Information:
Income From Continuing Operations
Income From Discontinued Operations
Net Income Attributable to the Company
Average Number of Shares Outstanding
Diluted Income Per Share Information:
Income From Continuing Operations
Discontinued Operations, net of tax per share
Net Income Attributable to the Company
Average Number of Shares Outstanding
Dividends Paid Per Share
Return on Average Equity
Year-end Financial Position:
Working capital
Total assets
Long-term debt
Total equity
Total shares outstanding (net of treasury
shares)
Other Information:
Number of employees
Stock price ranges—
U.S. exchanges — High
— Low
$
$
$
$
$
$
$
$
$
$
$
$
2014
2013
2012
2011
2010
$
12,951
$
12,261
$
11,924
$
11,526
$
10,550
7,515
3,135
10,650
2,301
21
(165)
(137)
37
2,057
586
1,471
26
1,497
32
1,465
2.64
0.05
2.69
545
2.61
0.04
2.65
553
1.06
19 %
2,350
17,840
3,376
7,133
$
$
$
$
$
$
$
$
$
$
7,226
2,958
10,184
2,077
18
(167)
(24)
69
1,973
594
1,379
6
1,385
28
1,357
2.46
0.01
2.47
549
2.42
0.01
2.43
558
0.96
19 %
2,491
16,980
2,621
7,975
$
$
$
$
$
$
$
$
$
$
7,134
2,961
10,095
1,829
24
(181)
—
24
1,696
492
1,204
(3)
1,201
25
1,176
2.16
—
2.16
544
2.13
—
2.13
552
0.90
19 %
2,399
16,288
2,658
6,606
$
$
$
$
$
$
$
$
$
$
6,969
2,919
9,888
1,638
28
(199)
(72)
9
1,404
422
982
33
1,015
22
993
1.76
0.06
1.82
542
1.73
0.06
1.79
551
0.86
16 %
1,909
15,454
2,668
5,940
$
$
$
$
$
$
$
$
$
$
6,465
3,146
9,611
939
20
(233)
—
43
769
204
565
306
871
16
855
1.01
0.55
1.56
540
1.00
0.55
1.55
544
0.81
14 %
2,171
15,310
3,026
6,415
540
547
545
539
541
57,000
55,000
54,000
52,000
51,000
58.74
44.25
$
$
48.56
34.43
$
$
35.78
30.69
$
$
32.00
25.29
$
$
27.50
20.21
(a)
Includes the impact of net restructuring costs of $12 million, $22 million, $78 million, $51 million, and $141 million in 2014, 2013, 2012,
2011, and 2010, respectively.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations, appearing under Item 7 of this report, for discussion of
significant items affecting our results of operations in 2014, 2013 and 2012.
25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Marsh & McLennan Companies, Inc. and Subsidiaries (the “Company”) is a global professional services
firm offering clients advice and solutions in risk, strategy and people. It is the parent company of a number
of the world’s leading risk experts and specialty consultants, including: Marsh, the insurance broker,
intermediary and risk advisors; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of
HR and related financial advice and services; and Oliver Wyman Group, the management, economic and
brand consultancy. With approximately 57,000 employees worldwide and annual revenue of
approximately $13 billion, the Company provides analysis, advice and transactional capabilities to clients
in more than 130 countries.
The Company conducts business through two segments:
• Risk and Insurance Services includes risk management activities (risk advice, risk transfer and
risk control and mitigation solutions) as well as insurance and reinsurance broking and services.
We conduct business in this segment through Marsh and Guy Carpenter.
• Consulting includes Health, Retirement, Talent and Investments consulting services and
products, and specialized management, economic and brand consulting services. We conduct
business in this segment through Mercer and Oliver Wyman Group.
We describe the primary sources of revenue and categories of expense for each segment below, in our
discussion of segment financial results. A reconciliation of segment operating income to total operating
income is included in Note 16 to the consolidated financial statements included in Part II Item 8 in this
report. The accounting policies used for each segment are the same as those used for the consolidated
financial statements.
This Management's Discussion & Analysis ("MD&A") contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. See “Information Concerning Forward-
Looking Statements” at the outset of this report.
Consolidated Results of Operations
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Income from Continuing Operations
Discontinued Operations, Net of Tax
Net Income Before Non-Controlling Interests
Net Income Attributable to the Company
Net Income from Continuing Operations Per Share:
Basic
Diluted
Net Income Per Share Attributable to the Company:
Basic
Diluted
Average number of shares outstanding:
Basic
Diluted
Shares outstanding at December 31,
26
2014
2012
$ 12,951 $ 12,261 $ 11,924
2013
$
$
$
$
$
$
$
$
7,515
3,135
10,650
7,226
2,958
10,184
2,301 $
1,471 $
26
1,497 $
1,465 $
2,077 $
1,379 $
6
1,385 $
1,357 $
7,134
2,961
10,095
1,829
1,204
(3)
1,201
1,176
2.64 $
2.61 $
2.46 $
2.42 $
2.69 $
2.65 $
2.47 $
2.43 $
545
553
540
549
558
547
2.16
2.13
2.16
2.13
544
552
545
Consolidated operating income increased 11% to $2.3 billion in 2014 compared with $2.1 billion in 2013.
This reflects the combined impact of a 6% increase in revenue and a 5% increase in expense.
Risk and Insurance Services operating income increased $88 million or 6% in 2014 compared with 2013.
Revenue increased 5%, or 3% on an underlying basis, to $6.9 billion in 2014, reflecting underlying
revenue growth of 4% at Marsh and 2% at Guy Carpenter, while expenses increased 5%, or 3% on an
underlying basis.
Consulting operating income increased $151 million or 18% to $996 million in 2014 compared with 2013,
reflecting a 6% increase in revenue and a 4% increase in expense. Mercer and Oliver Wyman recorded
underlying revenue growth of 3% and 15%, respectively, in 2014 as compared to 2013.
The Company recorded expenses related to the early extinguishment of debt of $137 million in 2014 and
$24 million in 2013.
Consolidated operating income increased 14% to $2.1 billion in 2013 compared with $1.8 billion in 2012
driven by a 3% increase in revenue on both a reported and underlying basis, with growth in each
operating company. Expenses increased 1% on both a reported and underlying basis as the Company
continues its efforts to manage expenses and improve operating efficiency.
Risk and Insurance Services operating income increased $87 million or 7% in 2013 compared with 2012.
Revenue increased 4%, or 3% on an underlying basis, to $6.6 billion in 2013 reflecting underlying
revenue growth of 3% at Marsh and 5% at Guy Carpenter.
Consulting operating income increased $153 million or 22% to $845 million in 2013 compared with 2012
due to the combined effects of increased revenue at Mercer and lower expenses in the segment.
Consolidated net income attributable to the Company was $1.5 billion in 2014, compared with $1.4 billion
in 2013 and $1.2 billion in 2012.
27
Consolidated Revenue and Expense
The Company conducts business in many countries, as a result of which the impact of foreign exchange
rate movements may impact period-to-period comparisons of revenue. Similarly, the revenue impact of
acquisitions and dispositions may impact period-to-period comparisons of revenue. Underlying revenue
measures the change in revenue from one period to another by isolating these impacts. The impact of
foreign currency exchange fluctuations, acquisitions and dispositions, including transfers among
businesses, on the Company’s operating revenues is as follows:
Year Ended
December 31,
(In millions, except percentage figures)
2014
2013
Risk and Insurance Services
Components of Revenue Change*
% Change
GAAP
Revenue
Currency
Impact
Acquisitions/
Dispositions
Impact
Underlying
Revenue
Marsh
Guy Carpenter
Subtotal
Fiduciary Interest Income
Total Risk and Insurance Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Corporate/Eliminations
Total Revenue
$
5,753
$
5,438
1,154
6,907
24
6,931
4,350
1,709
6,059
1,131
6,569
27
6,596
4,241
1,460
5,701
6%
2%
5%
5%
3%
17%
6%
(1)%
—
(1)%
(1)%
(1)%
—
(1)%
(39)
(36)
$ 12,951
$ 12,261
6%
(1)%
*
Components of revenue change may not add due to rounding.
3%
1%
3%
3%
—
2%
—
2%
4%
2%
4%
3%
3%
15%
6%
5%
The following table provides more detailed revenue information for certain of the components presented
above:
Year Ended
December 31,
(In millions, except percentage figures)
2014
2013
Components of Revenue Change*
% Change
GAAP
Revenue
Currency
Impact
Acquisitions/
Dispositions
Impact
Underlying
Revenue
Marsh:
EMEA
Asia Pacific
Latin America
Total International
U.S. / Canada
Total Marsh
Mercer:
Health
Retirement
Investments
Talent
Total Mercer
$
1,980
$
1,902
683
413
3,076
2,677
659
392
2,953
2,485
$
5,753
$
5,438
$
1,553
$
1,511
1,375
1,344
836
586
780
606
$
4,350
$
4,241
4 %
4 %
5 %
4 %
8 %
6 %
3 %
2 %
7 %
(3)%
3 %
—
(4)%
(10)%
(2)%
(1)%
(1)%
(1)%
—
(3)%
(2)%
(1)%
1%
—
6%
1%
6%
3%
—
—
1%
—
—
3 %
7 %
10 %
5 %
3 %
4 %
3 %
2 %
9 %
(1)%
3 %
Underlying revenue measures the change in revenue using consistent currency exchange rates,
excluding the impact of certain items that affect comparability such as: acquisitions, dispositions and
transfers among businesses.
*
Components of revenue change may not add due to rounding.
28
Year Ended
December 31,
Components of Revenue Change*
(In millions, except percentage figures)
2013
2012
% Change
GAAP
Revenue
Currency
Impact
Acquisitions/
Dispositions
Impact
Underlying
Revenue
Risk and Insurance Services
Marsh
Guy Carpenter
Subtotal
Fiduciary Interest Income
$
5,438
$
5,232
1,131
6,569
27
1,079
6,311
39
Total Risk and Insurance Services
6,596
6,350
Consulting
Mercer
Oliver Wyman Group
Total Consulting
4,241
1,460
5,701
4,147
1,466
5,613
4%
5%
4%
4%
2%
—
2%
(1)%
(1)%
(1)%
(1)%
(1)%
1 %
(1)%
2%
1%
2%
2%
—
—
—
Corporate /Eliminations
(36)
(39)
Total Revenue
$ 12,261
$ 11,924
3%
(1)%
1%
3 %
5 %
4 %
3 %
4 %
(1)%
2 %
3 %
The following table provides more detailed revenue information for certain of the components presented
above:
Year Ended
December 31,
(In millions, except percentage figures)
2013
2012
Components of Revenue Change*
% Change
GAAP
Revenue
Currency
Impact
Acquisitions/
Dispositions
Impact
Underlying
Revenue
Marsh:
EMEA
Asia Pacific
Latin America
Total International
U.S. / Canada
Total Marsh
Mercer:
Health
Retirement
Investments
Talent
Total Mercer
$
1,902
$
1,860
659
392
2,953
2,485
656
353
2,869
2,363
$
5,438
$
5,232
$
1,511
$
1,412
1,344
1,396
780
606
735
604
$
4,241
$
4,147
2 %
—
11 %
3 %
5 %
4 %
7 %
(4)%
6 %
—
2 %
—
(5)%
(9)%
(2)%
—
(1)%
—
—
(3)%
(2)%
(1)%
—
—
7 %
1 %
4 %
2 %
1 %
(4)%
1 %
4 %
—
3 %
5 %
13 %
4 %
2 %
3 %
6 %
1 %
9 %
(1)%
4 %
Underlying revenue measures the change in revenue using consistent currency exchange rates,
excluding the impact of certain items that affect comparability such as: acquisitions, dispositions and
transfers among businesses.
*
Components of revenue change may not add due to rounding.
Revenue
Consolidated revenue of $13 billion in 2014 increased 6%, or 5% on an underlying basis, compared with
$12.3 billion in 2013. Revenue in the Risk and Insurance Services segment increased 5% in 2014
compared with 2013, or 3% on an underlying basis, with underlying revenue growth of 4% at Marsh and
2% at Guy Carpenter. The Consulting segment's revenue increased 6% on both a reported and
underlying basis. On an underlying basis, Mercer's revenue was up 3% in 2014 compared with 2013,
while revenue of the Oliver Wyman Group increased 15%.
29
Consolidated revenue for 2013 increased 3% on both a reported and underlying basis to $12.3 billion
compared with $11.9 billion in 2012. Revenue in the Risk and Insurance Services segment increased 4%
in 2013 compared with 2012, or 3% on an underlying basis, with underlying revenue growth of 3% at
Marsh and 5% at Guy Carpenter. The Consulting segment's revenue increased 2% on both a reported
and underlying basis. On an underlying basis, Mercer's revenue was up 4% in 2013 compared with 2012,
while the Oliver Wyman Group decreased 1%.
Operating Expense
Consolidated operating expenses increased 5% in 2014 compared with the same period in 2013 on a
reported basis and 4% on an underlying basis. The increase in underlying expenses primarily reflects
higher incentive compensation, facilities and software amortization costs, partly offset by lower pension
costs.
Consolidated operating expenses increased 1% in 2013 compared with the same period in 2012 on both
a reported and underlying basis. The increase in underlying expenses primarily reflects higher incentive
compensation and pension costs, partly offset by lower costs related to professional indemnity claims.
Risk and Insurance Services
In the Risk and Insurance Services segment, the Company’s subsidiaries and other affiliated entities act
as brokers, agents or consultants for insureds, insurance underwriters and other brokers in the areas of
risk management, insurance broking and insurance program management services, primarily under the
name of Marsh; and engage in reinsurance broking, catastrophe and financial modeling services and
related advisory functions, primarily under the name of Guy Carpenter.
Marsh and Guy Carpenter are compensated for brokerage and consulting services primarily through fees
paid by clients and/or commissions paid out of premiums charged by insurance and reinsurance
companies. Commission rates vary in amount depending upon the type of insurance or reinsurance
coverage provided, the particular insurer or reinsurer, the capacity in which the broker acts and
negotiations with clients. Revenues can be affected by premium rate levels in the insurance/reinsurance
markets, the amount of risk retained by insurance and reinsurance clients themselves and by the value of
the risks that have been insured since commission based compensation is frequently related to the
premiums paid by insureds/reinsureds. In many cases, fee compensation may be negotiated in advance,
based on the type of risk, coverage required, and service provided by the Company and ultimately placed
into the insurance market or retained by the client. The trends and comparisons of revenue from one
period to the next can be affected by changes in premium rate levels, fluctuations in client risk retention,
and increases or decreases in the value of risks that have been insured, as well as new and lost
business, and the volume of business from new and existing clients.
Marsh also receives compensation from insurance companies. This compensation includes, among other
things, payment for consulting and analytics services provided to insurers; administrative and other
services provided to or on behalf of insurers (including services relating to the administration and
management of quota shares, panels and other facilities in which insurers participate); and contingent
commissions in parts of its operations. Marsh and Guy Carpenter receive interest income on certain funds
(such as premiums and claims proceeds) held in a fiduciary capacity for others. The investment of
fiduciary funds is regulated by state and other insurance authorities. These regulations typically provide
for segregation of fiduciary funds and limit the types of investments that may be made with them. Interest
income from these investments varies depending on the amount of funds invested and applicable interest
rates, both of which vary from time to time. For presentation purposes, fiduciary interest is segregated
from the other revenues of Marsh and Guy Carpenter and separately presented within the segment, as
shown in the revenue by segments charts earlier in this MD&A.
30
The results of operations for the Risk and Insurance Services segment are presented below:
(In millions of dollars)
Revenue
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Operating Income Margin
Revenue
2014
6,931
3,781
1,641
5,422
1,509
2013
6,596
3,618
1,557
5,175
1,421
2012
6,350
3,502
1,514
5,016
1,334
$
$
$
$
$
$
21.8%
21.5%
21.0%
Revenue in the Risk and Insurance Services segment increased 5%, or 3% on an underlying basis, in
2014 compared with 2013.
In Marsh, revenue grew to $5.8 billion or 6% in 2014 as compared to 2013, reflecting a 4% increase on
an underlying basis and a 3% increase from acquisitions, partly offset by a 1% decrease resulting from
the impact of foreign currency translation. The underlying revenue increase reflects growth in all major
geographies driven by strong new business, particularly in countries such as the U.S., Canada, and the
U.K., as well as in Africa. International operations had underlying revenue growth of 5% reflecting
increases of 10% in Latin America, 7% in Asia Pacific and 3% in EMEA, while U.S. / Canada increased
3%.
Guy Carpenter’s revenue increased 2% to $1.2 billion in 2014 compared with 2013 on both a reported
and an underlying basis, reflecting growth across the U.S., U.K. Facultative, Asia and Global Specialties
such as Aviation and Marine.
Fiduciary interest income was $24 million in 2014 compared to $27 million in 2013 due to lower average
invested funds combined with lower interest rates.
The Risk and Insurance segment completed fifteen acquisitions during 2014.
•
January - Marsh & McLennan Agency ("MMA") acquired Barney & Barney, LLC, a San Diego-
based insurance broking firm that provides insurance, risk management, and employee benefits
solutions to businesses and individuals throughout the U.S. and abroad, Great Lakes Employee
Benefits Services, Inc., an employee group benefits consulting and brokerage firm based in
Michigan, and Bond Network, Inc., a surety bonding agency based in North Carolina.
• February - Marsh acquired Central Insurance Services, an independent insurance broker in
Scotland that provides insurance broking and risk advisory services to companies of all sizes
across industry sectors.
• March - MMA acquired Capstone Insurance Services, LLC, an agency that provides property-
casualty insurance and risk management solutions to businesses and individuals throughout
South Carolina.
• May - MMA acquired Kinker-Eveleigh Insurance Agency, an Ohio-based agency specializing in
property-casualty and employee benefits solutions, VISICOR, a full-service employee benefits
brokerage and consulting firm based in Texas and Senn Dunn Insurance, a full service insurance
brokerage located in North Carolina.
• August - Marsh acquired Seguros Morrice y Urrutia S.A., an insurance broker based in Panama
City, Panama.
• September - Marsh acquired Kocisko Insurance Brokers, Inc., a full service commercial insurance
brokerage located in Montreal, Quebec.
• October - MMA acquired NuWest Insurance Services, Inc., a California-based property-casualty
agency.
• November - Marsh acquired Torrent Technologies, Inc., a Montana-based flood insurance
specialist.
• December - Marsh acquired Seafire Insurance Services, LLC, a Kansas-based managing general
underwriter, and Trade Insure NV, a leading distributor of credit insurance policies in Belgium, and
31
MMA acquired The Benefit Planning Group, Inc., a North Carolina-based employee benefit
consulting firm.
Revenue in the Risk and Insurance Services segment increased 4%, or 3% on an underlying basis, in
2013 compared with 2012.
In Marsh, revenue grew to $5.4 billion in 2013, an increase of 4% from the prior year, reflecting 3%
growth in underlying revenue and a 2% increase from acquisitions, partly offset by a 1% decrease
resulting from the impact of foreign currency translation. The underlying revenue increase of 3% reflects
growth in all major geographies which was driven by increased new business. International operations
had underlying revenue growth of 4% reflecting increases of 13% in Latin America, 5% in Asia Pacific and
3% in EMEA, while U.S. / Canada increased 2%.
Guy Carpenter’s revenue increased 5% to $1.1 billion in 2013 compared with 2012, or 5% on an
underlying basis, reflecting growth across North America, International, Global Specialties and U.K.
Facultative.
Fiduciary interest income was $27 million in 2013 compared to $39 million in 2012 due to lower average
invested funds combined with lower interest rates.
The Risk and Insurance segment completed six acquisitions during 2013.
•
•
June - Marsh acquired Rehder y Asociados Group, an insurance adviser in Peru. The business
includes the insurance broker Rehder y Asociados and employee health and benefits specialist,
Humanasalud. Marsh also completed the acquisition of Franco & Acra Tecniseguros, an
insurance advisor in the Dominican Republic.
July - Guy Carpenter acquired Smith Group, a specialist disability reinsurance risk manager and
consultant based in Maine.
• September - Marsh purchased an additional stake in Insia a.s., an insurance broker operating in
the Czech Republic and Slovakia which, when combined with its prior holdings, gave Marsh a
controlling interest. Insia a.s. was previously accounted for under the equity method.
• November - MMA acquired Elsey & Associates, a Texas-based provider of surety bonds and
insurance coverage to the construction industry.
• December - MMA acquired Cambridge Property and Casualty, a Michigan-based company
providing insurance and risk management services to high net worth individuals and mid-sized
businesses.
Expense
Expenses in the Risk and Insurance Services segment increased 5% on a reported basis and 3% on an
underlying basis in 2014 compared with 2013. The increase in expenses on an underlying basis is
primarily due to higher base salaries, incentive compensation, facilities and intangible asset amortization
expenses, partly offset by lower pension costs.
Expenses in the Risk and Insurance Services segment increased 3% on both a reported and underlying
basis in 2013 compared with 2012. The increase in expenses on an underlying basis is primarily due to
higher base salaries, pension costs and adjustments to acquisition-related contingent consideration
liabilities, partly offset by lower costs related to professional indemnity claims.
Consulting
The Company conducts business in its Consulting segment through two main business groups. Mercer
provides consulting expertise, advice, services and solutions in the areas of health, retirement, talent and
investments. Oliver Wyman Group provides specialized management, economic and brand consulting
services.
The major component of revenue in the Consulting business is fees paid by clients for advice and
services. Mercer, principally through its health line of business, also earns revenue in the form of
commissions received from insurance companies for the placement of group (and occasionally individual)
insurance contracts, primarily life, health and accident coverages. Revenue for Mercer’s delegated
investment management business and certain of Mercer’s defined contribution administration services
consists principally of fees based on assets under management and/or administration.
32
Revenue in the Consulting segment is affected by, among other things, global economic conditions,
including changes in clients’ particular industries and markets. Revenue is also affected by competition
due to the introduction of new products and services, broad trends in employee demographics, including
levels of employment, the effect of government policies and regulations, and fluctuations in interest and
foreign exchange rates. Revenues from the provision of investment management services and retirement
trust and administrative services are significantly affected by the level of assets under management and
securities market performance.
Reimbursable expenses incurred by professional staff in the generation of revenue and sub-advisory fees
incurred by the majority of funds are included on a gross basis in the investment management business in
revenue and the related expenses are included in other operating expenses.
The results of operations for the Consulting segment are presented below:
(In millions of dollars)
Revenue
Compensation and Benefits
Other Operating Expenses
Operating Expenses
Operating Income
Operating Income Margin
Revenue
$
$
2014
6,059
3,398
1,665
5,063
996
16.4%
$
$
2013
5,701
3,269
1,587
4,856
845
14.8%
$
$
2012
5,613
3,298
1,623
4,921
692
12.3%
Consulting revenue in 2014 increased 6% on both a reported and underlying basis as compared to 2013.
Mercer’s revenue was $4.4 billion in 2014, an increase of 3% on both a reported and underlying basis,
partly offset by a 1% decrease due to the impact of foreign currency translation. The underlying revenue
growth reflects an increase in Investments of 9%, Health of 3% and Retirement of 2%, partly offset by a
decrease in Talent of 1%. Oliver Wyman’s revenue increased 17% in 2014 compared to 2013, or 15% on
an underlying basis, as all industry sectors contributed to this growth. On a geographic basis, the revenue
growth was attributable to both North America and Europe.
The Consulting segment completed six acquisitions during 2014.
• February - Mercer acquired Transition Assist, a retiree exchange specializing in helping retirees
in employer-sponsored plans select Medicare supplemental health care insurance.
• September - Oliver Wyman acquired Bonfire Communications, an agency specializing in
employee engagement and internal communications based in San Francisco, California.
• November - Mercer acquired AUSREM, a remuneration research and workforce consulting
specialist based in Australia, and Jeitosa Group International, a global HR business consultancy
and IT systems integration firm.
• December - Mercer acquired Denarius, a compensation and benefits survey and information
products consulting firm based in Chile, and Oliver Wyman acquired OC&C Strategy Consultants
(Boston) LLC (part of the OC&C network) a Boston-based consulting firm specializing in the
business media, information services and education sectors.
During 2014, Mercer acquired a 34% stake in South Africa-based Alexander Forbes Group Holding
Limited (“Alexander Forbes”) becoming a strategic shareholder after Alexander Forbes successfully
launched an initial public offering. The Company’s investment in Alexander Forbes is accounted for using
the equity method of accounting and is included in other assets in the consolidated balance sheet.
Consulting revenue in 2013 increased 2% compared with 2012 on both a reported and underlying basis.
Mercer’s revenue was $4.2 billion in 2013, an increase of 2% reflecting a 4% increase in underlying
revenue, partly offset by a 1% decrease due to the impact of foreign currency translation. The underlying
revenue growth was primarily driven by Health and Investments, which increased 6% and 9%,
respectively. Oliver Wyman’s revenue was flat in 2013 compared to 2012, as a 1% decrease in underlying
revenue was offset by a 1% increase due to the impact of foreign currency translation.
33
The Consulting segment completed two acquisitions during 2013.
•
July - Oliver Wyman acquired Corven, a U.K.-based management consultancy firm.
• August - Mercer acquired Global Remuneration Solutions, a market leading compensation
consulting firm based in South Africa.
Expense
Consulting expenses in 2014 increased 4% on both a reported and underlying basis compared to 2013.
This increase reflects the impact of higher incentive compensation costs, partly offset by lower pension
costs.
Consulting expenses in 2013 decreased 1% on both a reported and underlying basis compared to 2012.
This decrease reflects the impact of lower restructuring costs and continued strong expense control.
Corporate and Other
Corporate expenses in 2014 were $204 million compared to $190 million in 2013. The increase is
primarily due to corporate initiatives, which include strengthening cyber security protections, expenses
related to strategic investments and corporate transformation efforts, primarily within the HR and Finance
functions.
Corporate expenses in 2013 were $190 million compared to $203 million in 2012. The decrease is
primarily due to lower amortization of equity awards and lower severance, partially offset by higher
pension expense.
Discontinued Operations
As part of the disposal transactions for Putnam and Kroll, the Company provided certain indemnities,
primarily related to pre-transaction tax uncertainties and legal contingencies. In accordance with
applicable accounting guidance, liabilities were established related to these indemnities at the time of the
sales and reflected as a reduction of the gain on disposal. Discontinued operations includes charges or
credits resulting from the settlement or resolution of the indemnified matters, as well as adjustments to the
liabilities related to such matters.
On December 31, 2014, an agreement was reached between Putnam and the Massachusetts
Department of Revenue ("DOR") regarding a tax dispute, which was covered under the indemnity
agreement discussed above. The December 2014 agreement was subject to certain approvals, which
included the State Attorney General and the Commissioner of the DOR. In January 2015, all necessary
approvals were received, the agreement was executed and the tax was paid. Concurrently, Putnam and
the Company executed a settlement agreement to resolve all remaining matters under the indemnity
agreement. The Company recorded a gain, net of federal tax, of approximately $28 million in 2014 related
to the settlement with Putnam.
Discontinued operations in 2013 includes estimated costs covered under the indemnity related to the Kroll
sale as well as tax indemnities related to the Putnam sale.
Summarized Statements of Income data for discontinued operations are as follows:
For the Years Ended December 31,
(In millions of dollars, except per share figures)
Income (loss) from discontinued operations, net of tax
Disposals of discontinued operations
Income tax (credit) expense
Disposals of discontinued operations, net of tax
Discontinued operations, net of tax
Discontinued operations, net of tax per share
—Basic
—Diluted
2014
2013
— $
42
16
26
26
$
— $
(4)
(10)
6
6
$
0.05
0.04
$
$
0.01
0.01
$
$
2012
—
(2)
1
(3)
(3)
—
—
$
$
$
$
34
Other Corporate Items
Interest
Interest income earned on corporate funds amounted to $21 million in 2014 compared with $18 million in
2013. The increase in interest income is due to a higher level of invested funds, partly offset by lower
effective interest rates. Interest expense was $165 million in 2014 compared with $167 million in 2013.
Interest income earned on corporate funds amounted to $18 million in 2013 compared with $24 million in
2012. The decrease in interest income is due to lower average interest rates compared with the prior
year. Interest expense was $167 million in 2013 compared with $181 million in 2012. The decrease is due
to lower average debt balances in 2013 and lower interest rates on senior notes issued in 2013 compared
with the interest rates on senior notes that matured or were extinguished during 2013.
Cost of Extinguishment of Debt
In October 2014, the Company redeemed $230 million of its 2015 notes and $400 million of its 2019
notes. The Company acquired the notes at market value plus a make-whole premium based on the terms
of the original indenture, which exceeded the carrying value of the notes and resulted in a cost of $137
million in the fourth quarter of 2014.
In October 2013, the Company redeemed $250 million of its 2015 Notes. The Company acquired the
notes at market value plus a make-whole premium based on the terms of the original indenture, which
exceeded the carrying value of the notes and resulted in a cost of approximately $24 million in the fourth
quarter of 2013.
Investment Income
The caption “Investment income” in the consolidated statements of income comprises realized and
unrealized gains and losses from investments recognized in current earnings. It includes, when
applicable, other than temporary declines in the value of debt and available-for-sale securities and equity
method gains or losses on its investment in private equity. The Company's investments may include direct
investments in insurance or consulting companies and investments in private equity funds. The Company
recorded investment income of $37 million and $69 million in 2014 and 2013, respectively. In 2014, the
Company recorded gains of $31 million related to our general partner carried interest from Trident III no
longer subject to claw-back and gains of $6 million primarily related to investments in private equity funds.
In 2013, the Company recorded gains of $41 million related to its general partner carried interest from
Trident III, $22 million of gains related to its investment in Trident II and $6 million primarily related to
investments in private equity funds. At December 31, 2014 and 2013, the Company had deferred
performance fees of approximately $16 million and $38 million, respectively, related to Trident III. The
timing of recognition of the remaining deferred performance fees is unknown and is not controlled by the
Company.
In 2013, investment income was $69 million compared with $24 million in 2012. This increase was
primarily due to $41 million of performance fees from Trident III. In addition, 2012 results included an
impairment loss on a debt security of $8 million.
Income Taxes
The Company's consolidated effective tax rate was 28.5%, 30.1% and 29.0% in 2014, 2013 and 2012,
respectively. The tax rate in each year reflects foreign operations which are taxed at rates lower than the
U.S. statutory tax rate. The lower effective tax rate attributed to the Company's foreign operations
primarily reflects lower corporate tax rates that prevail outside of the U.S., net of the U.S. tax impact from
repatriating foreign earnings. In 2014, pre-tax income in the U.K., Canada, Australia, Germany and
Bermuda accounted for approximately 60% of the Company's total non-U.S. pre-tax income, with
effective rates in those countries of 21%, 26%, 29%, 28% and 1%, respectively. Under current U.S. tax
law, the Company anticipates its non-U.S. operations will continue to incur taxes at rates below the U.S.
federal tax rate of 35%. The Company's U.S. revenue over the past three years has been approximately
45% of total revenue, while over that period the pre-tax income from U.S. locations varied from 15% to
23% of total pre-tax income.
35
As a U.S.-domiciled parent holding company, Marsh & McLennan Companies, Inc. is the issuer of
essentially all of the Company's external indebtedness, and incurs the related interest expense in the U.S.
Further, most senior executive and oversight functions are conducted in the U.S. and the associated
costs are incurred primarily in the United States.
The effective tax rate may vary significantly from period to period for the foreseeable future. It is sensitive
to the geographic mix and repatriation of the Company's earnings, which may result in higher or lower tax
rates. A proportional increase in U.S. pre-tax income will tend to increase the effective tax rate because
U.S. federal and state corporate tax rates exceed tax rates applicable outside the U.S. Losses in certain
jurisdictions cannot be offset by earnings from other operations, and may require valuation allowances
that affect the rate, depending on estimates of the realizability of associated deferred tax assets. The
effective tax rate is also sensitive to changes in unrecognized tax benefits, including the impact of settled
tax audits and expired statutes of limitation.
The realization of deferred tax assets depends on generating future taxable income during the periods in
which the tax benefits are deductible or creditable. Tax liabilities are determined and assessed
jurisdictionally by legal entity or filing group. Certain taxing jurisdictions allow or require combined or
consolidated tax filings. The Company assessed the realizability of its deferred tax assets and considered
all available evidence, including the existence of a recent history of losses, placing particular weight on
evidence that could be objectively verified. A valuation allowance was recorded to reduce deferred tax
assets to the amount that the Company believes is more likely than not to be realized.
Changes in tax laws or tax rulings could have a significant impact on our effective tax rate. For example,
proposals for fundamental U.S. international tax reform, if enacted, could have a significant adverse
impact on the effective tax rate.
Liquidity and Capital Resources
The Company is organized as a holding company, a legal entity separate and distinct from its operating
subsidiaries. As a holding company without significant operations of its own, the Company is dependent
upon dividends and other payments from its operating subsidiaries to meet its obligations for paying
principal and interest on outstanding debt obligations, for paying dividends to stockholders, for share
repurchases and for corporate expenses. Other sources of liquidity include borrowing facilities discussed
below in financing cash flows.
The Company derives a significant portion of its revenue and operating profit from operating subsidiaries
located outside of the United States. Funds from the Company’s operating subsidiaries located outside of
the United States are regularly repatriated to the United States out of annual earnings. At December 31,
2014, the Company had approximately $1.3 billion of cash and cash equivalents in its foreign operations,
substantially all of which is considered to be permanently invested in those operations to fund foreign
investments and working capital needs. At the current time, the Company does not intend to repatriate
any of this cash. The non-U.S. cash and cash equivalents considered permanently reinvested includes
$179 million of operating funds required to be maintained for regulatory requirements or as collateral
under certain captive insurance arrangements. The Company expects to continue its practice of
repatriating foreign funds out of current annual earnings. While management does not foresee a need to
repatriate the funds which are currently deemed permanently invested, if facts or circumstances change,
management could elect to repatriate them, if necessary, which could result in higher effective tax rates in
the future. During 2014, the Company recorded foreign currency translation adjustments which reduced
net equity by $515 million. Continued strengthening of the U.S. dollar against foreign currencies would
further reduce the translated U.S. dollar value of the Company’s net investments in its non-U.S.
subsidiaries, as well as the translated U.S. dollar value of cash repatriations from those subsidiaries.
Cash on our consolidated balance sheets includes funds available for general corporate purposes. Funds
held on behalf of clients in a fiduciary capacity are segregated and shown separately in the consolidated
balance sheets as an offset to fiduciary liabilities. Fiduciary funds cannot be used for general corporate
purposes, and should not be considered as a source of liquidity for the Company.
36
Operating Cash Flows
The Company generated $2.1 billion of cash from operations in 2014, compared with $1.3 billion in 2013.
These amounts reflect the net income reported by the Company during those periods, excluding gains or
losses from investments, cost of extinguishment of debt and the disposition of businesses, adjusted for
non-cash charges such as depreciation and amortization and changes in working capital which relate,
primarily, to the timing of payments for accrued liabilities or receipts of assets. Approximately half of this
increase is due to lower pension contributions in 2014 as compared to 2013, which is further discussed
below.
Pension Related Items
During 2014, the Company contributed $25 million to its U.S. pension plans and $156 million to non-U.S.
pension plans. In 2013, the Company contributed $26 million to U.S. plans and $620 million to non-U.S.
plans, which included contributions of $250 million to pre-fund all of the 2014, and a substantial portion of
the 2015 deficit funding contributions for the U.K. plans and a discretionary contribution of $70 million to
the Canadian plans.
In the U.S., contributions to the tax-qualified defined benefit plans are based on ERISA guidelines and the
Company generally expects to maintain a funded status of 80% or more of the liability determined under
the ERISA guidelines. The pension stabilization provisions included in the "Moving Ahead for Progress in
the 21st Century Act", enacted on July 6, 2012, changed the methodology for determining the discount
rate used for calculating plan liabilities under ERISA, which determines, in part, the funding requirements.
After considering the impact of the pension funding stabilization provisions discussed above, the
Company made a $0.2 million contribution to its tax-qualified U.S. pension plan in the first quarter of
2014. There currently is no ERISA funding requirement for the U.S. qualified plan for 2015. The Company
expects to fund approximately $25 million to its non-qualified U.S. pension plans in 2015.
The Company has a large number of non-U.S. defined benefit pension plans, the largest of which are in
the U.K., which comprise approximately 83% of non-U.S. plan assets. Contribution rates for non-U.S.
plans are generally based on local funding practices and statutory requirements, which may differ
significantly from measurements under U.S. GAAP. In the U.K., contributions to defined benefit pension
plans are based on statutory requirements and are determined through a negotiation process between
the Company and the plans' trustee that typically occurs every three years in conjunction with the
actuarial valuation of the plans. This negotiation process is governed by U.K. pension regulations. The
assumptions that result from the funding negotiations are different from those used for U.S. GAAP and
currently result in a lower funded status than under U.S. GAAP. In March 2014, the Company and the
Trustee of the U.K. Defined Benefits Plans agreed to a funding deficit recovery plan for the U.K. defined
benefit pension plans. The current agreement with the Trustee sets out the annual deficit contributions
which would be due based on the deficit at December 31, 2012. The funding level is subject to re-
assessment, in most cases on November 1st of each year. If the funding level on November 1st has
sufficiently improved, no deficit funding contributions will be required in the following year, and the
contribution amount will be deferred. As part of a long-term strategy, which depends on having greater
influence over asset allocation and overall investment decisions, the Company has agreed to support
annual deficit contributions by the U.K. operating companies under certain circumstances, up to GBP 450
million over a seven-year period.
As a result of the significant improvement in funded status during 2013, which included the $250 million
deficit pre-funding contribution discussed above, no additional deficit recovery contributions were required
in 2014. Based on the funding test carried out at November 1, 2014, Company contributions to the U.K.
plans in 2015 are expected to be $54 million. The U.K. employers also contribute an expense allowance
each year of approximately $9 million.
In the aggregate, the Company expects to contribute approximately $169 million to its non-U.S. defined
benefit plans in 2015, comprising approximately $106 million to plans outside of the U.K. and $63 million
to the U.K. plans.
Funding amounts may be influenced by future asset performance, the level of discount rates and other
variables impacting the funded status of the plan.
37
After completion of a consultation period with affected colleagues, in January 2014, the Company
amended its U.K. defined benefit pension plans to close those plans to future benefit accruals effective
August 1, 2014 and replaced those plans, along with its existing defined contribution plans, with a new,
comprehensive defined contribution arrangement. This change resulted in a curtailment of the U.K.
defined benefit plans and, as required under U.S. GAAP, the Company re-measured the defined benefit
plans’ assets and liabilities at the amendment date, based on assumptions and market conditions at that
date. As a result of the re-measurement, the Projected Benefit Obligation ("PBO") increased by
approximately $147 million and the funded status decreased by approximately $137 million. The change
in the PBO and in the funded status relates primarily to a decrease in the discount rate at the re-
measurement date. The net periodic benefit costs recognized in 2014 were based on a weighted average
resulting from the December 31, 2013 measurement and the January 2014 re-measurement. The
Company recognized a curtailment gain of $65 million in the first quarter of 2014, primarily resulting from
the recognition of the remaining unamortized prior service credit related to a plan amendment made in
December 2012. This gain was largely offset by the cost of a transition benefit to certain employees most
impacted by the amendment.
The year-over-year change in the funded status of the Company's pension plans is impacted by the
variance between actual and assumed results, particularly with regard to return on assets and changes in
the discount rate, as well as the amount of Company contributions, if any. Unrecognized actuarial losses
were approximately $1.7 billion and $3.2 billion at December 31, 2014 for the U.S. plans and non-U.S.
plans, respectively, compared with $1.0 billion and $3.0 billion at December 31, 2013. The increase is
primarily due to the impact of decreases in the discount rates, partly offset by actual returns on plan
assets in 2014 that were higher than the estimated long-term rate of return on plan assets. In the past
several years, the amount of actuarial losses has been significantly impacted, both positively and
negatively, by actual asset performance and changes in discount rates. The discount rate used to
measure plan liabilities decreased in both the U.S. and the U.K. (the Company's two largest plans) in
2014 after increasing in 2013 for the first time in four years. Prior to 2013, the discount rate decreased in
each of the four years from 2009 to 2012. At the end of 2009, the weighted average discount rate for all
plans was 6.0%, declining to 5.6%, 4.9% and 4.4% at the end of 2010, 2011 and 2012, respectively. In
2013, the weighted average discount rate increased to 4.8%, and in 2014, it decreased to 3.8%. An
increase in the discount rate decreases the measured plan benefit obligation, resulting in actuarial gains,
while a decrease in the discount rate increases the measured plan obligation, resulting in actuarial losses.
During 2014, the Company's defined benefit pension plan assets had actual returns of 9.8% and 19.4% in
the U.S. and U.K., respectively. During 2013, the Company's defined benefit pension plan assets had
actual returns of 12.6%, and 8.6% in the U.S. and U.K., respectively; and in 2012, the actual returns were
14.1% in the U.S. and 9.8% in the U.K. In 2013, both the increase in the discount rate and actual asset
returns that were higher than the assumed rates of return contributed to actuarial gains. In 2012, actuarial
losses resulting from declines in the discount rate were partly offset by actual asset returns which
exceeded the assumed rate of return.
Overall, based on the measurement at December 31, 2014, expenses related to the Company’s defined
benefit pension are expected to increase in 2015 by approximately $115 million. This is being driven by
an increase of approximately $80 million in U.S. plans and by an increase of $35 million in non-U.S.
plans. The increase in the expected pension expense results primarily from a decrease in the discount
rates used to measure plan liabilities and lower pension expense in 2014 as a result of recording the
curtailment gain in 2014, partly offset by the impact of an increase in plan assets at the end of 2014
resulting from investment returns.
The Company’s accounting policies for its defined benefit pension plans, including the selection of and
sensitivity to assumptions, are discussed below under Management’s Discussion of Critical Accounting
Policies. For additional information regarding the Company’s retirement plans, see Note 8 to the
consolidated financial statements.
The Company plans to implement changes to its post-65 retiree medical plan in 2015. The impact of the
plan amendment will be recognized when the terms of the amendment are finalized and communicated to
impacted employees.
38
Financing Cash Flows
Net cash used for financing activities was $961 million in 2014 compared with $834 million of net cash
used for financing activities in 2013.
Debt
The Company increased outstanding debt by approximately $432 million in 2014 and $37 million in 2013.
In September 2014, the Company issued $300 million of 2.35% five-year senior notes and $500 million of
3.50% 10.5-year senior notes. In October 2014, a significant portion of the net proceeds of this offering
was used to redeem $630 million of debt, including $230 million of 5.75% senior notes due in September
2015 and $400 million of 9.25% senior notes due in 2019. Total cash outflow related to this transaction
was approximately $765 million, including a $137 million cost for early redemption, which is reflected as a
charge in the consolidated statements of income in the fourth quarter of 2014.
During the second quarter of 2014, the Company issued $600 million of 3.5% ten-year senior notes. A
portion of the net proceeds of this offering was used for general corporate purposes as well as the
repayment of $320 million of 5.375% senior notes that matured in July 2014.
In September 2013, the Company issued $250 million of 2.55% five-year senior notes and $250 million of
4.05% ten-year senior notes. The net proceeds of this offering were used for general corporate purposes,
which included a partial redemption of $250 million of the outstanding principal amount of the existing
5.75% senior notes due 2015. The redemption settled in October 2013 with a total cash outflow of
approximately $275 million, including a $24 million cost for early redemption.
During the first quarter of 2013, the Company used cash to repay its 4.85% fixed rate $250 million senior
notes that matured.
During the first quarter of 2012, the Company repaid its 6.25% fixed rate $250 million senior notes that
matured. The Company used proceeds from the issuance of 2.3% five-year $250 million senior notes in
the first quarter to repay the maturing notes.
Acquisitions
During 2014, the Company paid $42 million of contingent payments related to acquisitions made in prior
years. These payments are split between financing and operating cash flows in the consolidated
statements of cash flows. The portion of these payments that is reflected as a financing activity is $30
million, which represents payments related to the contingent consideration liability that was recorded on
the date of acquisition. Payments related to increases in the contingent consideration liability subsequent
to the date of acquisition, which were $12 million in 2014, are reflected as operating cash flows.
Remaining estimated future contingent consideration payments of $207 million for acquisitions completed
in 2014 and in prior years are included in accounts payable and accrued liabilities or other liabilities in the
consolidated balance sheet at December 31, 2014. The Company paid deferred purchase consideration
related to prior years' acquisitions of $25 million, $15 million and $59 million for the years ended
December 31, 2014, 2013 and 2012, respectively. Remaining deferred cash payments of approximately
$96 million are included in accounts payable and accrued liabilities or other liabilities in the consolidated
balance sheet at December 31, 2014.
The Company paid $17 million in 2013 and $30 million in 2012 of contingent payments related to
acquisitions made in prior periods.
Credit Facilities
On March 27, 2014, the Company and certain of its foreign subsidiaries amended the $1.0 billion facility,
discussed below, into a new $1.2 billion multi-currency five-year unsecured revolving credit facility. The
interest rate on this facility is based on LIBOR plus a fixed margin which varies with the Company's credit
ratings. This facility expires in March 2019 and requires the Company to maintain certain coverage and
leverage ratios which are tested quarterly. There were no borrowings outstanding under this facility at
December 31, 2014.
The Company and certain of its foreign subsidiaries previously maintained a $1.0 billion multi-currency
five-year revolving credit facility. The facility was previously due to expire in October 2016 and was in
39
effect until March 2014. There were no borrowings outstanding under this facility at the time it was
amended.
In December 2012, the Company closed on a $50 million, 3-year delayed draw term loan facility. The
interest rate on this facility is based on LIBOR plus an agreed fixed margin which varies with the
Company's credit ratings. The facility requires the Company to maintain coverage ratios and leverage
ratios consistent with the revolving credit facility discussed above. The Company had $50 million of
borrowings under this facility at December 31, 2014.
The Company's senior debt is currently rated Baa1 by Moody's and A- by Standard & Poor's. The
Company's short-term debt is currently rated P-2 by Moody's and A-2 by Standard & Poor's. The
Company carries a stable outlook from Moody's and Standard & Poor's.
The Company also maintains other credit facilities, guarantees and letters of credit with various banks,
primarily related to operations located outside the United States, aggregating $260 million at
December 31, 2014 and $282 million at December 31, 2013. There was $0.6 million outstanding
borrowings under these facilities at December 31, 2014 and $1 million outstanding borrowings under
these facilities at December 31, 2013.
Share Repurchases
In May 2014, the Board of Directors increased the amount of the Company's share repurchase program
to $2 billion. During 2014, the Company repurchased 15.5 million shares of its common stock for total
consideration of $800 million at an average price per share of $51.44. The Company remains authorized
to purchase additional shares of its common stock up to a value of approximately $1.3 billion. There is no
time limit on this authorization. During 2013, the Company repurchased approximately 13.2 million shares
of its common stock for total consideration of $550 million at an average price per share of $41.76.
Dividends
The Company paid total dividends of $582 million in 2014 ($1.06 per share), $533 million in 2013 ($0.96
per share) and $497 million in 2012 ($0.90 per share).
Investing Cash Flows
Net cash used for investing activities amounted to $1.2 billion in 2014 compared with $446 million used
for investing activities in 2013.
The Company made 21 acquisitions in 2014. Cash used for these acquisitions, net of cash acquired, was
$554 million.
On June 23, 2014, Mercer entered into a definitive agreement to acquire a 34% stake in South Africa-
based Alexander Forbes Group Holdings Limited ("Alexander Forbes"), becoming a strategic shareholder
after Alexander Forbes successfully launched an initial public offering. Mercer purchased its stake in
Alexander Forbes in two tranches at 7.50 South African Rand per share. On July 24, 2014, the Company
purchased 14.9% of Alexander Forbes common shares for approximately $137 million and in October
2014, the Company paid approximately $166 million for the remaining 19.1%, which is included in other
assets in the consolidated balance sheet. The investment in Alexander Forbes is accounted for using the
equity method.
The Company made eight acquisitions in 2013. Cash used for these acquisitions, net of cash acquired
was $125 million. In addition, in 2013, the Company paid $2 million for the purchase of other intangible
assets.
The Company received proceeds from distributions on its Investment in Trident II of $100 million and $35
million in 2013 and 2012, respectively. Trident II has now fully harvested all its portfolio investments and
final distributions were made to partners during the fourth quarter of 2013.
The Company’s additions to fixed assets and capitalized software, which amounted to $368 million in
2014 and $401 million in 2013, primarily relate to computer equipment purchases, the refurbishing and
modernizing of office facilities and software development costs.
The Company has commitments for potential future investments of approximately $60 million in two
private equity funds that invest primarily in financial services companies.
40
Commitments and Obligations
The following sets forth the Company’s future contractual obligations by the types identified in the table
below as of December 31, 2014:
Contractual Obligations
(In millions of dollars)
Current portion of long-term debt
Long-term debt
Interest on long-term debt
Net operating leases
Service agreements
Other long-term obligations
Purchase commitments
Total
Total
11 $
3,394
1,339
2,218
441
335
30
7,768 $
$
$
Payment due by Period
1-3
Years
Within
1 Year
4-5
Years
11 $
—
133
317
195
80
29
765 $
— $
324
259
534
177
166
1
1,461 $
— $
575
242
393
59
87
—
1,356 $
After 5
Years
—
2,495
705
974
10
2
—
4,186
The above does not include the liability for unrecognized tax benefits of $97 million as the Company is
unable to reasonably predict the timing of settlement of these liabilities, other than approximately $4
million that may become payable during 2015. The above does not include the indemnified liabilities
discussed in Note 15 as the Company is unable to reasonably predict the timing of settlement of these
liabilities. The above does not include an $82 million payment the Company made to Putnam in January
2015 to fully satisfy and extinguish its indemnity obligations related to the Putnam disposition.The above
does not include net pension liabilities of approximately $2.0 billion because the timing and amount of
ultimate payment of such liability is dependent upon future events, including, but not limited to, future
returns on plan assets, and changes in the discount rate used to measure the liabilities. The amounts of
estimated future benefits payments to be made from pension plan assets are disclosed in Note 8 to the
consolidated financial statements. In 2015, the Company expects to contribute approximately $25 million
and $169 million to its U.S. and non-U.S. pension plans, respectively.
Management’s Discussion of Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States (“GAAP”) requires management to make estimates and judgments that affect reported
amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities.
Management considers the policies discussed below to be critical to understanding the Company’s
financial statements because their application places the most significant demands on management’s
judgment, and requires management to make estimates about the effect of matters that are inherently
uncertain. Actual results may differ from those estimates.
Legal and Other Loss Contingencies
The Company and its subsidiaries are subject to numerous claims, lawsuits and proceedings including
claims for errors and omissions ("E&O"). GAAP requires that a liability be recorded when a loss is both
probable and reasonably estimable. Significant management judgment is required to apply this guidance.
The Company utilizes case level reviews by inside and outside counsel, an internal actuarial analysis and
other analyses to estimate potential losses. The liability is reviewed quarterly and adjusted as
developments warrant. In many cases, the Company has not recorded a liability, other than for legal fees
to defend the claim, because we are unable, at the present time, to make a determination that a loss is
both probable and reasonably estimable. Given the unpredictability of E&O claims and of litigation that
could flow from them, it is possible that an adverse outcome in a particular matter could have a material
adverse effect on the Company’s businesses, results of operations, financial condition or cash flow in a
given quarterly or annual period.
In addition, to the extent that insurance coverage is available, significant management judgment is
required to determine the amount of recoveries that are probable of collection under the Company’s
various insurance programs.
41
Retirement Benefits
The Company maintains qualified and non-qualified defined benefit pension and defined contribution
plans for its eligible U.S. employees and a variety of defined benefit and defined contribution plans for its
eligible non-U.S. employees. The Company’s policy for funding its tax qualified defined benefit retirement
plans is to contribute amounts at least sufficient to meet the funding requirements set forth in U.S. and
applicable foreign laws.
The Company recognizes the funded status of its over-funded defined benefit pension and retiree medical
plans as a net benefit plan asset and its unfunded and underfunded plans as a net benefit plan liability.
The gains or losses and prior service costs or credits that have not been recognized as components of
net periodic costs are recorded as a component of Accumulated Other Comprehensive Income (“AOCI”),
net of tax, in the Company’s consolidated balance sheets. The gains and losses that exceed specified
corridors are amortized prospectively out of AOCI over a period that approximates the average remaining
service period of active employees, or for plans in which substantially all the participants are inactive,
over the remaining life expectancy of the inactive employees.
The determination of net periodic pension cost is based on a number of assumptions, including an
expected long-term rate of return on plan assets, the discount rate, mortality and assumed rate of salary
increase. Significant assumptions used in the calculation of net periodic pension costs and pension
liabilities are disclosed in Note 8 to the consolidated financial statements. The Company believes the
assumptions for each plan are reasonable and appropriate and will continue to evaluate assumptions at
least annually and adjust them as appropriate.
Future pension expense or credits will depend on plan provisions, future investment performance, future
assumptions and various other factors related to the populations participating in the pension plans.
Holding all other assumptions constant, a half-percentage point change in the rate of return on plan
assets and discount rate assumptions would affect net periodic pension cost for the U.S. and U.K. plans,
which together comprise approximately 86% of total pension plan liabilities, as follows:
(In millions of dollars)
Assumed Rate of Return on Plan Assets
Discount Rate
0.5 Percentage
Point Increase
0.5 Percentage
Point Decrease
U.S.
(20) $
(45) $
U.K.
(38) $
(13) $
U.S.
20
48
$
$
U.K.
38
9
$
$
Changing the discount rate and leaving the other assumptions constant may not be representative of the
impact on expense, because the long-term rates of inflation and salary increases are often correlated with
the discount rate. Changes in these assumptions will not necessarily have a linear impact on the net
periodic pension cost.
The Company contributes to certain health care and life insurance benefits provided to its retired
employees. The cost of these post-retirement benefits for employees in the U.S. is accrued during the
period up to the date employees are eligible to retire, but is funded by the Company as incurred. The key
assumptions and sensitivity to changes in the assumed health care cost trend rate are discussed in Note
8 to the consolidated financial statements.
Income Taxes
The Company's tax rate reflects its income, statutory tax rates and tax planning in the various jurisdictions
in which it operates. Significant judgment is required in determining the annual effective tax rate and in
evaluating uncertain tax positions. The Company reports a liability for unrecognized tax benefits resulting
from uncertain tax positions taken or expected to be taken in a tax return. The evaluation of a tax position
is a two-step process. The first step involves recognition. The Company determines whether it is more
likely than not that a tax position will be sustained upon tax examination, including resolution of any
related appeals or litigation, based on only the technical merits of the position. The technical merits of a
tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent,
regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax
position. If a tax position does not meet the more likely than not recognition threshold, the benefit of that
position is not recognized in the financial statements. The second step is measurement. A tax position
42
that meets the more likely than not recognition threshold is measured to determine the amount of benefit
to recognize in the financial statements. The tax position is measured as the largest amount of benefit
that is greater than 50 percent likely of being realized upon ultimate resolution with a taxing authority.
Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting
period and involve significant management judgment. Subsequent changes in judgment based upon new
information may lead to changes in recognition, derecognition, and measurement. Adjustments may
result, for example, upon resolution of an issue with the taxing authorities, or expiration of a statute of
limitations barring an assessment for an issue.
Tax law requires items be included in the Company's tax returns at different times than the items are
reflected in the financial statements. As a result, the annual tax expense reflected in the consolidated
statements of income is different than that reported in the tax returns. Some of these differences are
permanent, such as expenses that are not deductible in the returns, and some differences are temporary
and reverse over time, such as depreciation expense. Temporary differences create deferred tax assets
and liabilities. Deferred tax liabilities generally represent tax expense recognized in the financial
statements for which payment has been deferred, or expense for which a deduction has been taken
already in the tax return but the expense has not yet been recognized in the financial statements.
Deferred tax assets generally represent items that can be used as a tax deduction or credit in tax returns
in future years for which a benefit has already been recorded in the financial statements. In assessing the
need for and amount of a valuation allowance for deferred tax assets, the Company considers whether it
is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts
the valuation allowance accordingly. The Company evaluates all significant available positive and
negative evidence, including the existence of losses in recent years and its forecast of future taxable
income by jurisdiction, in assessing the need for a valuation allowance. The Company also considers tax
planning strategies that would result in realization of deferred tax assets, and the presence of taxable
income in prior period tax filings in jurisdictions that allow for the carryback of tax attributes pursuant to
the applicable tax law. The underlying assumptions the Company uses in forecasting future taxable
income require significant judgment and take into account the Company's recent performance. The
ultimate realization of deferred tax assets is dependent on the generation of future taxable income during
the periods in which temporary differences or carry-forwards are deductible or creditable. Valuation
allowances are established for deferred tax assets when it is estimated that it is more likely than not that
future taxable income will be insufficient to fully use a deduction or credit in that jurisdiction.
Fair Value Determinations
Goodwill Impairment Testing—The Company is required to assess goodwill and any indefinite-lived
intangible assets for impairment annually, or more frequently if circumstances indicate impairment may
have occurred. The Company performs the annual impairment test for each of its reporting units during
the third quarter of each year. In accordance with applicable accounting guidance, the Company
assesses qualitative factors to determine whether it is necessary to perform the two-step goodwill
impairment test. The Company considered numerous factors, which included that the fair value of each
reporting unit exceeded its carrying value by a substantial margin in its most recent estimate of reporting
unit fair values, whether significant acquisitions or dispositions occurred which might alter the fair value of
its reporting units, macroeconomic conditions and their potential impact on reporting unit fair values,
actual performance compared with budget and prior projections used in its estimation of reporting unit fair
values, industry and market conditions, and the year-over year change in the Company’s share price.
The Company completed its qualitative assessment in the third quarter of 2014 and concluded that a two-
step goodwill impairment test was not required in 2014 and that goodwill was not impaired.
Share-based Payment
The guidance for accounting for share-based payments requires, among other things, that the estimated
fair value of stock options be charged to earnings. Significant management judgment is required to
determine the appropriate assumptions for inputs such as volatility and expected term necessary to
estimate option values. In addition, management judgment is required to analyze the terms of the plans
and awards granted thereunder to determine if awards will be treated as equity awards or liability awards,
as defined by the accounting guidance.
43
As of December 31, 2014, there was $16 million of unrecognized compensation cost related to stock
option awards. The weighted-average periods over which the costs are expected to be recognized is 1.05
years. Also as of December 31, 2014, there was $55.8 million of unrecognized compensation cost related
to the Company’s restricted stock, restricted stock unit and deferred stock unit awards. The weighted-
average period over which that cost is expected to be recognized is approximately one year.
See Note 9 to the consolidated financial statements for additional information regarding accounting for
share-based payments.
New Accounting Pronouncements
Note 1 to the consolidated financial statements contains a summary of the Company’s significant
accounting policies, including a discussion of recently issued accounting pronouncements and their
impact or potential future impact on the Company’s financial results, if determinable, under the sub-
heading "New Accounting Pronouncements".
44
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk and Credit Risk
Certain of the Company’s revenues, expenses, assets and liabilities are exposed to the impact of interest
rate changes and fluctuations in foreign currency exchange rates and equity markets.
Interest Rate Risk and Credit Risk
Interest income generated from the Company’s cash investments as well as invested fiduciary funds will
vary with the general level of interest rates.
The Company had the following investments subject to variable interest rates:
(In millions of dollars)
Cash and cash equivalents invested in money market funds, certificates of
deposit and time deposits
Fiduciary cash and investments
December 31,
2014
$
$
1,958
4,552
Based on the above balances, if short-term interest rates increased or decreased by 10%, or 8 basis
points, over the course of the year, annual interest income, including interest earned on fiduciary funds,
would increase or decrease by approximately $3 million.
In addition to interest rate risk, our cash investments and fiduciary fund investments are subject to
potential loss of value due to counter-party credit risk. To minimize this risk, the Company and its
subsidiaries invest pursuant to a Board approved investment policy. The policy mandates the preservation
of principal and liquidity and requires broad diversification with counter-party limits assigned based
primarily on credit rating and type of investment. The Company carefully monitors its cash and fiduciary
fund investments and will further restrict the portfolio as appropriate to market conditions. The majority of
cash and fiduciary fund investments are invested in short-term bank deposits and liquid money market
funds.
Foreign Currency Risk
The translated values of revenue and expense from the Company’s international operations are subject to
fluctuations due to changes in currency exchange rates. The non-U.S. based revenue that is exposed to
foreign exchange fluctuations is approximately 55% of total revenue. We periodically use forward
contracts and options to limit foreign currency exchange rate exposure on net income and cash flows for
specific, clearly defined transactions arising in the ordinary course of business. Although the Company
has significant revenue generated in foreign locations which is subject to foreign exchange rate
fluctuations, in most cases both the foreign currency revenue and expenses are in the functional currency
of the foreign location. As such, the U.S. dollar translation of both the revenues and expenses, as well as
the potentially offsetting movements of various currencies against the U.S. dollar, generally tends to
mitigate the impact on net operating income of foreign currency risk. If foreign exchange rates of major
currencies (Euro, Sterling, Australian dollar and Canadian dollar) moved 10% in the same direction
against the US dollar compared with the foreign exchange rates in 2014, the Company estimates net
operating income would increase or decrease by approximately $54 million. The Company has exposure
to approximately 80 foreign currencies overall. In the fourth quarter of 2014, the U.S. dollar strengthened
significantly against most currencies. If exchange rates at January 31, 2015 hold constant throughout
2015, the Company estimates the year-over-year impact from conversion of foreign currency earnings
would reduce full year income by approximately $125 million. In Continental Europe, the largest amount
of revenue from renewals for the Risk & Insurance segment occurs in the first quarter. Consequently, a
significant portion of the year-over-year foreign exchange impact would occur in the first quarter.
Equity Price Risk
The Company holds investments in both public and private companies as well as private equity funds that
invest primarily in financial services companies. Publicly traded investments of $18 million are classified
as available for sale. Non-publicly traded investments of $12 million are accounted for using the cost
45
method and $388 million are accounted for using the equity method. The investments are subject to risk
of changes in market value, which if determined to be other than temporary, could result in realized
impairment losses. The Company periodically reviews the carrying value of such investments to
determine if any valuation adjustments are appropriate under the applicable accounting pronouncements.
Other
A number of lawsuits and regulatory proceedings are pending. See Note 15 to the consolidated financial
statements included in this report.
46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31,
(In millions, except per share figures)
Revenue
Expense:
Compensation and benefits
Other operating expenses
Operating expenses
Operating income
Interest income
Interest expense
Cost of extinguishment of debt
Investment income
Income before income taxes
Income tax expense
Income from continuing operations
Discontinued operations, net of tax
Net income before non-controlling interests
Less: Net income attributable to non-controlling interests
Net income attributable to the Company
Basic net income per share – Continuing operations
– Net income attributable to the Company
Diluted net income per share – Continuing operations
– Net income attributable to the Company
Average number of shares outstanding – Basic
Shares outstanding at December 31,
– Diluted
2014
2012
$ 12,951 $ 12,261 $ 11,924
2013
7,515
3,135
10,650
2,301
21
(165)
(137)
37
2,057
586
1,471
26
1,497
$
$
$
$
$
32
1,465 $
2.64 $
2.69 $
2.61 $
2.65 $
545
553
540
7,226
2,958
10,184
2,077
18
(167)
(24)
69
1,973
594
1,379
6
1,385
28
7,134
2,961
10,095
1,829
24
(181)
—
24
1,696
492
1,204
(3)
1,201
25
1,357 $
1,176
2.46 $
2.47 $
2.42 $
2.43 $
549
558
547
2.16
2.16
2.13
2.13
544
552
545
The accompanying notes are an integral part of these consolidated statements.
47
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31,
(In millions)
Net income before non-controlling interests
Other comprehensive income (loss), before tax:
Foreign currency translation adjustments
Unrealized investment loss
(Loss) gain related to pension/post-retirement plans
Other comprehensive (loss) income, before tax
Income tax (credit) expense on other comprehensive loss
Other comprehensive (loss) income, net of tax
Comprehensive income
Less: Comprehensive income attributable to non-controlling
interests
Comprehensive income attributable to the Company
$
2014
2013
2012
$ 1,497 $ 1,385
$ 1,201
(527)
—
(1,085)
(1,612)
(386)
(1,226)
(86)
1
1,213
1,128
442
686
177
(1)
(447)
(271)
(152)
(119)
271
2,071
1,082
32
28
239 $ 2,043
25
$ 1,057
The accompanying notes are an integral part of these consolidated statements.
48
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(In millions, except share figures)
ASSETS
Current assets:
Cash and cash equivalents
Receivables
Commissions and fees
Advanced premiums and claims
Other
Less-allowance for doubtful accounts and cancellations
Net receivables
Current deferred tax assets
Other current assets
Total current assets
Goodwill and intangible assets
Fixed assets, net
Pension related assets
Deferred tax assets
Other assets
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt
Accounts payable and accrued liabilities
Accrued compensation and employee benefits
Accrued income taxes
Total current liabilities
Fiduciary liabilities
Less – cash and investments held in a fiduciary capacity
Long-term debt
Pension, postretirement and postemployment benefits
Liabilities for errors and omissions
Other liabilities
Commitments and contingencies
Equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued
Common stock, $1 par value, authorized
1,600,000,000 shares, issued 560,641,640 shares at December 31, 2014 and December 31, 2013
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Non-controlling interests
Less – treasury shares, at cost, 20,499,596 shares at December 31, 2014 and 13,882,204 shares
at December 31, 2013
Total equity
$
The accompanying notes are an integral part of these consolidated statements.
49
2014
2013
$
1,958
$
2,303
3,142
50
280
3,472
(95)
3,377
521
199
6,055
7,933
809
967
876
1,200
3,065
61
282
3,408
(98)
3,310
482
205
6,300
7,365
828
979
626
882
$
17,840
$
16,980
$
11
$
1,883
1,633
178
3,705
4,552
(4,552)
—
3,376
2,244
341
1,041
—
—
561
930
10,335
(3,847)
79
8,058
(925)
7,133
17,840
$
334
1,861
1,466
148
3,809
4,234
(4,234)
—
2,621
1,150
373
1,052
—
—
561
1,028
9,452
(2,621)
70
8,490
(515)
7,975
16,980
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(In millions)
Operating cash flows:
2014
2013
2012
Net income before non-controlling interests
$
1,497
$
1,385
$
1,201
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization of fixed assets and capitalized software
Amortization of intangible assets
Intangible asset impairment
Adjustments to acquisition related contingent consideration liability
Cost of early extinguishment of debt
Provision for deferred income taxes
Gain on investments
(Gain) Loss on disposition of assets
Share-based compensation expense
Changes in assets and liabilities:
Net receivables
Other current assets
Other assets
Accounts payable and accrued liabilities
Accrued compensation and employee benefits
Accrued income taxes
Contributions to pension and other benefit plans in excess of current year
expense/credit
Other liabilities
Effect of exchange rate changes
Net cash provided by operations
Financing cash flows:
Purchase of treasury shares
Proceeds from debt
Repayments of debt
Payments for early extinguishment of debt
Shares withheld for taxes on vested units – treasury shares
Issuance of common stock from treasury shares
Payments of deferred and contingent consideration for acquisitions
Distributions of non-controlling interests
Dividends paid
Net cash used for financing activities
Investing cash flows:
Capital expenditures
Net sales of long-term investments
Purchase of equity investment
Proceeds from sales of fixed assets
Dispositions
Acquisitions
Other, net
Net cash used for investing activities
Effect of exchange rate changes on cash and cash equivalents
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
302
86
—
19
137
127
(37)
(38)
93
(58)
(32)
25
45
167
43
(152)
(185)
73
286
72
5
24
24
184
(69)
1
129
(245)
(70)
(75)
106
(8)
43
(432)
13
(32)
277
72
8
(44)
—
96
(24)
23
177
(144)
(37)
44
(210)
72
44
(117)
(81)
(35)
2,112
1,341
1,322
(800)
1,393
(331)
(765)
(64)
263
(55)
(20)
(582)
(961)
(368)
6
(304)
3
—
(554)
(5)
(1,222)
(274)
(345)
(550)
547
(260)
(274)
(79)
352
(9)
(28)
(533)
(834)
(230)
248
(259)
—
(97)
248
(30)
(16)
(497)
(633)
(401)
(320)
93
—
5
5
(142)
(6)
(446)
(59)
2
20
—
6
—
(292)
3
(583)
82
188
2,303
2,301
2,113
$
1,958
$
2,303
$
2,301
The accompanying notes are an integral part of these consolidated statements.
50
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
For the Years Ended December 31,
(In millions, except per share figures)
COMMON STOCK
Balance, beginning and end of year
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year
Change in accrued stock compensation costs
Issuance of shares under stock compensation plans and employee
stock purchase plans and related tax impact
Purchase of subsidiary shares from non-controlling interests
Balance, end of period
RETAINED EARNINGS
Balance, beginning of year
Net income attributable to the Company
Dividend equivalents declared - (per share amounts: $1.06 in 2014,
$0.96 in 2013, and $0.90 in 2012)
Dividends declared – (per share amounts: $1.06 in 2014, $0.96 in
2013, and $0.90 in 2012)
Balance, end of period
ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance, beginning of year
Other comprehensive (loss) income, net of tax
Balance, end of period
TREASURY SHARES
Balance, beginning of year
2014
2013
2012
$
561 $
561 $
561
$ 1,028 $ 1,107 $ 1,156
(16)
(22)
(15)
(83)
(57)
(34)
—
—
1
930 $ 1,028 $ 1,107
$
$ 9,452 $ 8,628 $ 7,949
1,176
1,357
1,465
(3)
(6)
(8)
(579)
(489)
$ 10,335 $ 9,452 $ 8,628
(527)
$ (2,621) $ (3,307) $ (3,188)
(119)
$ (3,847) $ (2,621) $ (3,307)
(1,226)
686
$
(515) $
(447) $
(595)
Issuance of shares under stock compensation plans and employee
stock purchase plans
Issuance of shares for acquisitions
Purchase of treasury shares
Balance, end of period
NON-CONTROLLING INTERESTS
Balance, beginning of year
Net income attributable to non-controlling interests
$
$
Distributions
Other changes
Balance, end of period
TOTAL EQUITY
387
3
(800)
(925) $
481
1
(550)
(515) $
70 $
32
(20)
(3)
79 $
64 $
28
(28)
6
378
—
(230)
(447)
57
25
(16)
(2)
64
$
$ 7,133 $ 7,975 $ 6,606
70 $
The accompanying notes are an integral part of these consolidated statements.
51
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations: Marsh & McLennan Companies, Inc. (the "Company”), a global professional
services firm, is organized based on the different services that it offers. Under this organizational
structure, the Company’s two business segments are Risk and Insurance Services and Consulting.
The Risk and Insurance Services segment provides risk management activities and insurance broking,
reinsurance broking and insurance program management services for businesses, public entities,
insurance companies, associations, professional services organizations, and private clients. The
Company conducts business in this segment through Marsh and Guy Carpenter.
The Company conducts business in its Consulting segment through two main business groups. Mercer
provides consulting expertise, advice, services and solutions in the areas of health, retirement, talent and
investments. Oliver Wyman Group provides specialized management and economic and brand consulting
services.
Acquisitions impacting the Risk and Insurance Services and Consulting segments are discussed in Note
4 below.
Principles of Consolidation: The accompanying consolidated financial statements include all wholly-
owned and majority-owned subsidiaries. All significant inter-company transactions and balances have
been eliminated.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or agent, the Company
generally collects premiums from insureds and, after deducting its commissions, remits the premiums to
the respective insurance underwriters. The Company also collects claims or refunds from underwriters on
behalf of insureds. Unremitted insurance premiums and claims proceeds are held by the Company in a
fiduciary capacity. Risk and Insurance Services revenue includes interest on fiduciary funds of $24 million,
$27 million and $39 million in 2014, 2013 and 2012, respectively. The Consulting segment recorded
fiduciary interest income of $6 million, $5 million and $4 million in 2014, 2013 and 2012, respectively.
Since fiduciary assets are not available for corporate use, they are shown in the consolidated balance
sheets as an offset to fiduciary liabilities.
Net uncollected premiums and claims and the related payables amounted to $7.3 billion and $8.2 billion
at December 31, 2014 and 2013, respectively. The Company is not a principal to the contracts under
which the right to receive premiums or the right to receive reimbursement of insured losses arises. Net
uncollected premiums and claims and the related payables are, therefore, not assets and liabilities of the
Company and are not included in the accompanying consolidated balance sheets.
In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or
insureds prior to collection. These advances are made from corporate funds and are reflected in the
accompanying consolidated balance sheets as receivables.
Mercer manages approximately $21 billion of assets in trusts or funds for which Mercer’s management or
trustee fee is considered a variable interest. Mercer is not the primary beneficiary of these trusts or funds.
Mercer’s only variable interest in any of these trusts or funds is its unpaid fees, if any. Mercer’s maximum
exposure to loss of its interests is, therefore, limited to collection of its fees.
Revenue: Risk and Insurance Services revenue includes insurance commissions, fees for services
rendered and interest income on certain fiduciary funds. Insurance commissions and fees for risk transfer
services generally are recorded as of the effective date of the applicable policies or, in certain cases
(primarily in the Company's reinsurance broking operations), as of the effective date or billing date,
whichever is later. A reserve for policy cancellation is provided based on historic and current data on
cancellations. Consideration for fee arrangements covering multiple insurance placements, the provision
of risk management and/or other services are allocated to all deliverables on the basis of their relative
selling prices. Fees for non-risk transfer services provided to clients are recognized over the period in
which the services are provided, using a proportional performance model. Fees resulting from
52
achievement of certain performance thresholds are recorded when such levels are attained and such fees
are not subject to forfeiture.
Consulting revenue includes fees paid by clients for advice and services and commissions from insurance
companies for the placement of individual and group contracts. Fee revenue for engagements where
remuneration is based on time plus out-of-pocket expenses is recognized based on the amount of time
consulting professionals expend on the engagement. For fixed fee engagements, revenue is recognized
using a proportional performance model. Revenue from insurance commissions not subject to a fee
arrangement is recorded over the effective period of the applicable policies. Revenue for asset based
fees is recognized on an accrual basis by applying the daily/monthly rate as contractually agreed with the
client to the applicable net asset value. On a limited number of engagements, performance fees may also
be earned for achieving certain prescribed performance criteria. Such fees are recognized when the
performance criteria have been achieved and, when required, agreed to by the client. Reimbursable
expenses incurred by professional staff in the generation of revenue and sub-advisory fees related to the
majority of funds in the investment management business are included in revenue and the related
expenses are included in other operating expenses.
Cash and Cash Equivalents: Cash and cash equivalents primarily consist of certificates of deposit and
time deposits, with original maturities of three months or less, and money market funds. The estimated
fair value of the Company's cash and cash equivalents approximates their carrying value. The Company
is required to maintain operating funds related to regulatory requirements outside the U.S. or as collateral
under captive insurance arrangements. At December 31, 2014, the Company maintained $179 million
related to these regulatory requirements.
Fixed Assets: Fixed assets are stated at cost less accumulated depreciation and amortization.
Expenditures for improvements are capitalized. Upon sale or retirement, the cost and related
accumulated depreciation and amortization are removed from the accounts and any gain or loss is
reflected in income. Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation of buildings, building improvements, furniture, and equipment is provided on a straight-line
basis over the estimated useful lives of these assets. Furniture and equipment is depreciated over
periods ranging from three to ten years. Leasehold improvements are amortized on a straight-line basis
over the periods covered by the applicable leases or the estimated useful life of the improvement,
whichever is less. Buildings are depreciated over periods ranging from thirty to forty years. The Company
periodically reviews long-lived assets for impairment whenever events or changes indicate that the
carrying value of assets may not be recoverable.
The components of fixed assets are as follows:
December 31,
(In millions of dollars)
Furniture and equipment
Land and buildings
Leasehold and building improvements
Less-accumulated depreciation and amortization
2014
$ 1,193
401
854
2,448
(1,639)
809
$
2013
$ 1,201
408
816
2,425
(1,597)
828
$
Investments: The Company holds investments in private companies and private equity funds.
Investments in private equity funds are accounted for under the equity method of accounting using a
consistently applied three-month lag period adjusted for any known significant changes from the lag
period to the reporting date of the Company. The underlying private equity funds follow investment
company accounting, where investments within the fund are carried at fair value. The Company records in
earnings, investment gains/losses for its proportionate share of the change in fair value of the funds.
Investments using the equity method of accounting are included in other assets in the consolidated
balance sheets.
53
As part of the sale of MMC Capital in 2005, the Company retained the rights to receive certain
performance fees related to the Trident II and Trident III private equity partnerships. The Company
recognizes performance fee income when such fees are no longer subject to forfeiture, which may take a
number of years to resolve. This income is based on the investment performance over the life of each
investment in the private equity fund, and future declines in the fund performance from current levels may
result in forfeiture of such revenue. Since Trident II fully harvested all its portfolio investments and made
final distributions to its partners in 2013, the Company no longer holds any rights to Trident II performance
fees. In 2014, the Company recorded investment income of $37 million compared to $69 million in 2013
and $24 million in 2012. The Company recorded Investment income related to its general partner carried
interest from Trident III no longer subject to clawback of $31 million and $41 million in 2014 and 2013,
respectively. In 2013, the Company recorded $15 million of general partner carried interest from Trident II.
There was no carried interest recorded in 2012. The Company also recorded net investment income
gains of $6 million, $13 million and $33 million in 2014, 2013 and 2012, respectively, primarily related to
its equity method investments. The Company had deferred performance fees of approximately $16 million
and $38 million, at December 31, 2014 and 2013, respectively, related to Trident III. Recognition of these
deferred performance fees will only occur as the Trident III investments are harvested and the
performance fees are no longer subject to clawback. The timing of recognition of the remaining deferred
performance fees is unknown and is not controlled by the Company.
Subsequent Event
On February 24, 2015, Mercer announced that it had made an investment to purchase approximately
10% of Benefitfocus (NASDAQ: BNFT), a benefits technology provider, with the option to increase its
ownership over time.
Goodwill and Other Intangible Assets: Goodwill represents acquisition costs in excess of the fair value
of net assets acquired. Goodwill is reviewed at least annually for impairment. The Company performs an
annual impairment test for each of its reporting units during the third quarter of each year. When a step 1
test is performed, fair values of the reporting units are estimated using either a market approach or a
discounted cash flow model. Carrying values for the reporting units are based on balances at the prior
quarter end and include directly identified assets and liabilities as well as an allocation of those assets
and liabilities not recorded at the reporting unit level. As discussed in Note 6, the Company may elect to
assess qualitative factors to determine if a step 1 test is necessary. Other intangible assets, which
primarily consist of customer lists, that are not deemed to have an indefinite life are amortized over their
estimated lives and reviewed for impairment upon the occurrence of certain triggering events in
accordance with applicable accounting literature. The Company had no indefinite lived identified
intangible assets at December 31, 2014 and 2013.
Capitalized Software Costs: The Company capitalizes certain costs to develop, purchase or modify
software for the internal use of the Company. These costs are amortized on a straight-line basis over
periods ranging from 3 to 10 years. Costs incurred during the preliminary project stage and post
implementation stage, are expensed as incurred. Costs incurred during the application development
stage are capitalized. Costs related to updates and enhancements are only capitalized if they will result in
additional functionality. Capitalized computer software costs of $501 million and $399 million, net of
accumulated amortization of $837 million and $748 million at December 31, 2014 and 2013, respectively,
are included in other assets in the consolidated balance sheets.
Legal and Other Loss Contingencies: The Company and its subsidiaries are subject to a significant
number of claims, lawsuits and proceedings including claims for errors and omissions ("E&O"). GAAP
requires that a liability be recorded when a loss is both probable and reasonably estimable. Significant
management judgment is required to apply this guidance. The Company utilizes case level reviews by
inside and outside counsel, an internal actuarial analysis and other analysis to estimate potential losses.
The liability is reviewed quarterly and adjusted as developments warrant. In many cases, the Company
has not recorded a liability, other than for legal fees to defend the claim, because we are unable, at the
present time, to make a determination that a loss is both probable and reasonably estimable. Given the
unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse
outcome in a particular matter could have a material adverse effect on the Company’s businesses, results
of operations, financial condition or cash flow in a given quarterly or annual period.
54
In addition, to the extent that insurance coverage is available, significant management judgment is
required to determine the amount of recoveries that are probable of collection under the Company’s
various insurance programs.
The legal and other contingent liabilities described above are not discounted.
Income Taxes: The Company's effective tax rate reflects its income, statutory tax rates and tax planning
in the various jurisdictions in which it operates. Significant judgment is required in determining the annual
effective tax rate and in evaluating uncertain tax positions and the ability to realize deferred tax assets.
The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken
or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first
step involves recognition. The Company determines whether it is more likely than not that a tax position
will be sustained upon tax examination, including resolution of any related appeals or litigation, based on
only the technical merits of the position. The technical merits of a tax position derive from both statutory
and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and
their applicability to the facts and circumstances of the tax position. If a tax position does not meet the
more likely than not recognition threshold, the benefit of that position is not recognized in the financial
statements. The second step is measurement. A tax position that meets the more likely than not
recognition threshold is measured to determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent
likely of being realized upon ultimate resolution with a taxing authority. Uncertain tax positions are
evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent
changes in judgment based upon new information may lead to changes in recognition, de-recognition,
and measurement. Adjustments may result, for example, upon resolution of an issue with the taxing
authorities, or expiration of a statute of limitations barring an assessment for an issue. The Company
recognizes in income tax expense, interest and penalties, if any, related to unrecognized tax benefits.
Tax law requires items be included in the Company's tax returns at different times than the items are
reflected in the financial statements. As a result, the annual tax expense reflected in the consolidated
statements of income is different than that reported in the income tax returns. Some of these differences
are permanent, such as expenses that are not deductible in the returns, and some differences are
temporary and reverse over time, such as depreciation expense. Temporary differences create deferred
tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax
deduction or credit in tax returns in future years for which benefit has already been recorded in the
financial statements. Valuation allowances are established for deferred tax assets when it is estimated
that future taxable income will be insufficient to use a deduction or credit in that jurisdiction. Deferred tax
liabilities generally represent tax expense recognized in the financial statements for which payment has
been deferred, or expense for which a deduction has been taken already in the tax return but the expense
has not yet been recognized in the financial statements.
Derivative Instruments: All derivatives, whether designated in hedging relationships or not, are
recorded on the balance sheet at fair value. If the derivative is designated as a fair value hedge, the
changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are
recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of
changes in the fair value of the derivative are recorded in other comprehensive income and are
recognized in the income statement when the hedged item affects earnings. Changes in the fair value
attributable to the ineffective portion of cash flow hedges are recognized in earnings.
Concentrations of Credit Risk: Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents, commissions and fees
receivable and insurance recoverable. The Company maintains a policy providing for the diversification of
cash and cash equivalent investments and places its investments in a large number of high quality
financial institutions to limit the amount of credit risk exposure. Concentrations of credit risk with respect
to receivables are generally limited due to the large number of clients and markets in which the Company
does business, as well as the dispersion across many geographic areas.
55
Per Share Data: Basic net income per share attributable to the Company and income from continuing
operations per share are calculated by dividing the respective after-tax income attributable to common
shares by the weighted average number of outstanding shares of the Company’s common stock.
Diluted net income per share attributable to the Company and income from continuing operations per
share are calculated by dividing the respective after-tax income attributable to common shares by the
weighted average number of outstanding shares of the Company’s common stock, which have been
adjusted for the dilutive effect of potentially issuable common shares. Reconciliations of the applicable
income components used for diluted EPS - Continuing Operations and basic weighted average common
shares outstanding to diluted weighted average common shares outstanding are presented below. The
reconciling items related to the calculation of diluted weighted average common shares outstanding are
the same for net income attributable to the Company.
Basic and Diluted EPS Calculation - Continuing Operations
(In millions, except per share figures)
Net income from continuing operations
Less: Net income attributable to non-controlling interests
Basic weighted average common shares outstanding
Dilutive effect of potentially issuable common shares
Diluted weighted average common shares outstanding
Average stock price used to calculate common stock equivalents
2013
2014
2012
$ 1,471 $ 1,379 $ 1,204
25
$ 1,439 $ 1,351 $ 1,179
544
549
545
32
28
8
9
8
553
552
$ 51.15 $ 40.97 $ 33.10
558
There were 18.0 million, 22.6 million and 32.0 million stock options outstanding as of December 31, 2014,
2013 and 2012, respectively.
Estimates: The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results may vary from those estimates.
New Accounting Pronouncements: In June 2014, the FASB issued new accounting guidance to clarify
the treatment of share-based payment awards that require a specific performance target to be achieved
in order for employees to be eligible to vest in the awards which include terms that may provide that the
performance conditions could be achieved after an employee completes the requisite service period. The
guidance requires that a performance target that affects vesting and that could be achieved after the
requisite service period be treated as a performance condition. As such, a reporting entity should apply
the existing guidance as it relates to awards with performance conditions that affect vesting. The
guidance is effective for annual periods beginning after December 15, 2015. Earlier adoption is permitted.
Adoption of the guidance is not expected to materially affect the Company's financial condition, results of
operations or cash flows.
In May 2014, the FASB issued new accounting guidance to clarify the principles for revenue recognition.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve that principle, the entity should
apply the following steps: identify the contract(s) with the customer, identify the performance obligations in
the contract(s), determine the transaction price, allocate the transaction price to the performance
obligations in the contract and recognize revenue when (or as) the entity satisfies a performance
obligation. The guidance is effective for fiscal years beginning after December 15, 2016, including interim
periods within that reporting period. Early application is not permitted. Entities are permitted to adopt the
guidance under one of the following methods: retrospectively to each prior reporting period presented
(with certain practical expedients allowed) or retrospectively with the cumulative effect of initially applying
the guidance recognized at the date of initial application. If an entity elects this transition method, it must
56
provide disclosures in reporting periods that include the date of initial application of the amount by which
each financial statement line item is affected in the current reporting period by application of the guidance
as compared to guidance that was in effect before the change, and an explanation for the reasons for
significant changes. The Company is currently evaluating the impact of the adoption of the guidance on
its financial condition and results of operations.
In April 2014, the FASB issued new accounting guidance which changes the criteria for reporting
discontinued operations and enhances disclosures in this area. Under the new guidance, only disposals
representing a strategic shift in operations, such as disposal of a major geographic area or a major line of
business, should be presented as discontinued operations. Those strategic shifts should have a major
impact on the organization's operations and financial results. In addition, the new guidance requires
expanded disclosures about discontinued operations. The guidance is effective for fiscal years beginning
on or after December 15, 2014. Adoption of the guidance is not expected to have a material affect on the
Company's financial condition, results of operations or cash flows.
In July 2013, the FASB issued new accounting guidance related to the presentation of unrecognized tax
benefits as a reduction to a deferred tax asset for a net operating loss carry-forward, a similar tax loss, or
a tax credit carry-forward. However, to the extent a net operating loss carry-forward, a similar tax loss, or
a tax credit carry-forward is not available at the reporting date under the tax law of the applicable
jurisdiction to settle taxes that would result from the disallowance of the tax position or the entity does not
intend to use the deferred tax asset for this purpose (provided that the tax law permits a choice), the
unrecognized tax benefit shall be presented in the financial statement as a liability and shall not be
combined with deferred tax assets. The guidance was effective for fiscal years beginning after December
15, 2013. The adoption of this new guidance impacted balance sheet classification and footnote
disclosure only and did not have a material impact on the Company's financial statements.
In June 2013, the FASB issued new accounting guidance which amends the criteria for an entity to qualify
as an investment company. The guidance clarifies the characteristics of an investment company, provides
comprehensive guidance to determine whether an entity is an investment company and sets
measurement and disclosure requirements for investment companies. The guidance is effective for
interim and annual reporting periods beginning after December 15, 2013. The adoption of this guidance
did not materially affect the Company's financial position, results of operations or cash flows.
In February 2013, the FASB issued new accounting guidance that adds new disclosure requirements for
items reclassified out of accumulated other comprehensive income. The Company implemented this new
guidance for the reporting period ended March 31, 2013. Other than enhanced disclosure, the adoption of
this new guidance did not have a material effect on the Company's financial statements.
Reclassifications: In the first quarter of 2014, the Company enhanced its operating cash flow
presentation within the statements of cash flows to show on single lines the impact of pension and other
benefit plan contributions in excess of the related expenses, and the non-cash impact of equity share
awards. Previously, the cash flow impact of those items was presented as part of changes in other assets
and other liabilities, and changes in other liabilities, respectively. The prior years' presentation was
conformed to the current presentation for the following line items within operating cash flows:
• Share-based compensation expense
• Changes in other assets
• Contributions to pension and other benefit plans in excess of current year expense/credit
• Changes in other liabilities
57
2. Supplemental Disclosures
The following schedule provides additional information concerning acquisitions, interest and income taxes
paid:
(In millions of dollars)
Assets acquired, excluding cash
Released from escrow in 2012
Liabilities assumed
Contingent/deferred purchase consideration
Net cash outflow for current year acquisitions
Purchase of other intangibles
Net cash outflow for acquisitions
(In millions of dollars)
Interest paid
Income taxes paid, net of refunds
2014
2013
$
815 $
—
2012
380
(62)
(42)
(46)
230
3
217 $
—
(53)
(39)
125
2
127 $
233
(64)
(197)
554
—
554 $
2014
2013
172 $
426 $
170 $
360 $
2012
183
350
$
$
$
The Company paid deferred purchase consideration related to prior years' acquisitions of $25 million, $15
million and $59 million for the years ended December 31, 2014, 2013 and 2012, respectively.
The Company had non-cash issuances of common stock under its share-based payment plan of $108
million, $150 million and $193 million for the years ended December 31, 2014, 2013 and 2012,
respectively. The Company recorded stock-based compensation expense related to equity awards of $75
million, $110 million and $152 million for the years ended December 31, 2014, 2013 and 2012,
respectively.
The consolidated statements of cash flows includes the cash flow impact of discontinued operations in
each cash flow category, which were insignificant to the overall cash flows of the Company.
An analysis of the allowance for doubtful accounts is as follows:
For the Year Ended December 31,
(In millions of dollars)
Balance at beginning of year
Provision charged to operations
Accounts written-off, net of recoveries
Effect of exchange rate changes and other
Balance at end of year
2014
98
20
(17)
(6)
95
$
$
2013
106
16
(19)
(5)
98
$
$
2012
105
11
(12)
2
106
$
$
58
3. Other Comprehensive Income (Loss)
The changes in the balances of each component of Accumulated Other Comprehensive Income ("AOCI")
for the years ended December 31, 2014 and 2013, including amounts reclassified out of AOCI, are as
follows:
(In millions of dollars)
Balance as of January 1, 2014
Other comprehensive loss
before reclassifications
Amounts reclassified from
accumulated other
comprehensive loss
Net current period other
comprehensive loss
Unrealized
Investment
Gains
Pension/Post-
Retirement
Plans Gains
(Losses)
Foreign
Currency
Translation
Adjustments
Total
$
5 $
(2,682) $
56 $
(2,621)
—
—
—
(816)
(515)
(1,331)
105
(711)
—
(515)
105
(1,226)
(3,847)
Balance as of December 31, 2014 $
5 $
(3,393) $
(459) $
(In millions of dollars)
Balance as of January 1, 2013
Other comprehensive income
(loss) before reclassifications
Amounts reclassified from
accumulated other
comprehensive loss
Net current period other
comprehensive income (loss)
Unrealized
Investment
Gains
Pension/Post-
Retirement
Plans Gains
(Losses)
Foreign
Currency
Translation
Adjustments
Total
$
4 $
(3,451) $
140 $
(3,307)
1
—
1
574
195
769
(84)
—
(84)
491
195
686
Balance as of December 31, 2013 $
5 $
(2,682) $
56 $
(2,621)
59
The components of other comprehensive income (loss) are as follows:
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Pension/post-retirement plans:
Amortization of prior service credits
Amortization of net actuarial losses
Curtailment gain
Losses included in periodic pension cost
Net losses arising during period
Foreign currency translation adjustments
Other adjustments
Pension/post-retirement plans losses
Other comprehensive loss
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Unrealized investment gains
Pension/post-retirement plans:
Amortization of prior service credits
Amortization of net actuarial losses
Losses included in periodic pension cost
Net gains arising during period
Foreign currency translation adjustments
Other adjustments
Pension/post-retirement plans gains
Other comprehensive income
For the Year Ended December 31,
(In millions of dollars)
Foreign currency translation adjustments
Unrealized investment losses
Pension/post-retirement plans:
Amortization of prior service credits
Amortization of net actuarial losses
Losses included in periodic pension cost
Net losses arising during period
Foreign currency translation adjustments
Other adjustments
Pension/post-retirement plans losses
Other comprehensive loss
2014
Tax
(Credit) Net of Tax
(515)
(12) $
Pre-Tax
$
(527) $
(16)
242
(65)
161
(1,418)
180
(8)
(1,085)
(1,612) $
(5)
74
(13)
56
(466)
39
(3)
(374)
(386) $
(11)
168
(52)
105
(952)
141
(5)
(711)
(1,226)
2013
Tax
(Credit)
Pre-Tax
(86) $
1
(22)
317
295
898
27
(7)
1,213
1,128 $
177 $
(1)
(31)
270
239
(648)
(113)
75
(447)
(271) $
Net of Tax
(84)
1
(2) $
—
(8)
108
100
339
8
(3)
444
442 $
(14)
209
195
559
19
(4)
769
686
Net of Tax
182
(2)
(5) $
1
(12)
90
78
(217)
(26)
17
(148)
(152) $
(19)
180
161
(431)
(87)
58
(299)
(119)
2012
Tax
(Credit)
Pre-Tax
$
$
$
$
$
60
The components of accumulated other comprehensive income (loss) are as follows:
(In millions of dollars)
December 31,
2014
December 31,
2013
Foreign currency translation adjustments (net of deferred tax (asset)
liability of $(5) and $7 in 2014 and 2013, respectively)
$
(459) $
Net unrealized investment gains (net of deferred tax liability of $2 in
both 2014 and 2013)
Net charges related to pension / post-retirement plans (net of deferred
tax asset of $1,587 and $1,213 in 2014 and 2013, respectively)
5
(3,393)
$
(3,847) $
56
5
(2,682)
(2,621)
4. Acquisitions
The Company’s acquisitions have been accounted for as business combinations. Net assets and results
of operations are included in the Company’s consolidated financial statements commencing at the
respective purchase closing dates. In connection with acquisitions, the Company records the estimated
value of the net tangible assets purchased and the value of the identifiable intangible assets purchased,
which typically consist of purchased customer lists, trademarks and non-compete agreements. The
valuation of purchased intangible assets involves significant estimates and assumptions. Any change in
assumptions could affect the carrying value of such intangible assets.
The Risk and Insurance segment completed fifteen acquisitions during 2014.
•
January - Marsh & McLennan Agency ("MMA") acquired Barney & Barney, LLC, a San Diego-
based insurance broking firm that provides insurance, risk management and employee benefits
solutions to businesses and individuals throughout the U.S. and abroad, Great Lakes Employee
Benefits Services, Inc., an employee group benefits consulting and brokerage firm based in
Michigan, and Bond Network, Inc., a surety bonding agency based in North Carolina.
• February - Marsh acquired Central Insurance Services, an independent insurance broker in
Scotland that provides insurance broking and risk advisory services to companies of all sizes
across industry sectors.
• March - MMA acquired Capstone Insurance Services, LLC, an agency that provides property-
casualty insurance and risk management solutions to businesses and individuals throughout
South Carolina.
• May - MMA acquired Kinker-Eveleigh Insurance Agency, an Ohio-based agency specializing in
property-casualty and employee benefits solutions, VISICOR, a full-service employee benefits
brokerage and consulting firm based in Texas, and Senn Dunn Insurance, a full-service insurance
brokerage located in North Carolina.
• August - Marsh acquired Seguros Morrice y Urrutia S.A., an insurance broker based in Panama
City, Panama.
• September - Marsh acquired Kocisko Insurance Brokers, Inc., a full-service commercial insurance
brokerage located in Montreal, Quebec.
• October - MMA acquired NuWest Insurance Services, Inc., a California-based property-casualty
agency.
• November - Marsh acquired Torrent Technologies, Inc., a Montana-based flood insurance
specialist.
• December - Marsh acquired Seafire Insurance Services, LLC, a Kansas-based managing general
underwriter, and Trade Insure NV, a leading distributor of credit insurance policies in Belgium, and
MMA acquired The Benefit Planning Group, Inc., a North Carolina-based employee benefit
consulting firm.
61
The Consulting segment completed six acquisitions during 2014.
• February - Mercer acquired Transition Assist, a retiree exchange specializing in helping retirees
in employer-sponsored plans select Medicare supplemental health care insurance.
• September - Oliver Wyman acquired Bonfire Communications, an agency specializing in
employee engagement and internal communications based in San Francisco, California.
• November - Mercer acquired AUSREM, a remuneration research and workforce consulting
specialist based in Australia, and Jeitosa Group International, a global HR business consultancy
and IT systems integration firm.
• December - Mercer acquired Denarius, a compensation and benefits survey and information
products consulting firm based in Chile, and Oliver Wyman acquired OC&C Strategy Consultants
(Boston) LLC (part of the OC&C network), a Boston-based consulting firm specializing in the
business media, information services and education sectors.
Total purchase consideration for acquisitions made during 2014 was $772 million, which consisted of
cash paid of $575 million and deferred purchase and estimated contingent consideration of $197 million.
Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to
four years. The fair value of the contingent consideration was based on projected revenue and earnings
of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to
adjustment when purchase accounting is finalized. During 2014, the Company also paid $25 million of
deferred purchase consideration and $42 million of contingent consideration related to acquisitions made
in prior years.
The following table presents the preliminary allocation of the acquisition cost to the assets acquired and
liabilities assumed, based on their fair values:
(In millions)
Cash
Estimated fair value of deferred/contingent consideration
Total consideration
Allocation of purchase price:
Cash and cash equivalents
Accounts receivable, net
Other current assets
Property, plant, and equipment
Intangible assets (primarily customer lists amortized over 10 years)
Goodwill
Other assets
Total assets acquired
Current liabilities
Other liabilities
Total liabilities assumed
Net assets acquired
Prior Year Acquisitions
$
$
$
2014
575
197
772
21
12
1
5
318
472
7
836
41
23
64
$
772
During 2013, the Risk and Insurance segment completed the following six acquisitions:
•
June - Marsh acquired Rehder y Asociados Group, an insurance adviser in Peru. The business
includes the insurance broker Rehder y Asociados and employee health and benefits specialist,
Humanasalud. Marsh also completed the acquisition of Franco & Acra Tecniseguros, an
insurance advisor in the Dominican Republic.
62
•
July - Guy Carpenter acquired Smith Group, a specialist disability reinsurance risk manager and
consultant based in Maine.
• September - Marsh purchased an additional stake in Insia a.s., an insurance broker operating in
the Czech Republic and Slovakia which, when combined with its prior holdings, gave Marsh a
controlling interest. Insia a.s. was previously accounted for under the equity method.
• November - MMA acquired Elsey & Associates, a Texas-based provider of surety bonds and
insurance coverage to the construction industry.
• December - MMA acquired Cambridge Property and Casualty, a Michigan-based company
providing insurance and risk management services to high net worth individuals and mid-sized
businesses.
During 2013, the Consulting segment completed the following two acquisitions:
•
July - Oliver Wyman acquired Corven, a U.K.-based management consultancy firm.
• August - Mercer acquired Global Remuneration Solutions, a market leading compensation
consulting firm based in South Africa.
Total purchase consideration for acquisitions made during 2013 was $178 million, which consisted of
cash paid of $139 million and deferred purchase and estimated contingent consideration of $39 million.
Contingent consideration arrangements are primarily based on EBITDA and revenue targets over two to
four years. The fair value of the contingent consideration was based on projected revenue and earnings
of the acquired entities. Estimated fair values of assets acquired and liabilities assumed are subject to
adjustment when purchase accounting is finalized. During 2013, the Company also paid $15 million of
deferred purchase consideration and $17 million of contingent consideration related to acquisitions made
in prior years. In addition, the Company paid $2 million to purchase other intangible assets during 2013.
Pro-Forma Information
While the Company does not believe its acquisitions in the aggregate are material, the following
unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2014 and
2013. In accordance with accounting guidance related to pro-forma disclosures, the information
presented for current year acquisitions is as if they occurred on January 1, 2013 and reflects acquisitions
made in 2013 as if they occurred on January 1, 2012. The pro-forma information adjusts for the effects of
amortization of acquired intangibles. The unaudited pro-forma financial data is presented for illustrative
purposes only and is not necessarily indicative of the operating results that would have been achieved if
such acquisitions had occurred on the dates indicated, nor is it necessarily indicative of future
consolidated results.
(In millions, except per share data)
Revenue
Income from continuing operations
Net income attributable to the Company
Basic net income per share:
– Continuing operations
– Net income attributable to the Company
Diluted net income per share:
– Continuing operations
– Net income attributable to the Company
Years Ended December 31,
2014
2013
2012
$ 13,039
$ 12,550
$ 12,202
$ 1,477
$ 1,395
$ 1,222
$ 1,471
$ 1,373
$ 1,195
$
$
$
$
2.65
2.70
2.62
2.66
$
$
$
$
2.49
2.50
2.45
2.46
$
$
$
$
2.20
2.20
2.16
2.16
The consolidated statements of income for 2014 include approximately $134 million of revenue and $18
million of operating income related to acquisitions made during 2014.
63
Alexander Forbes: In June 2014, Mercer entered into a definitive agreement to acquire a 34% interest in
South Africa-based Alexander Forbes Group Holding Limited (“Alexander Forbes”) becoming a strategic
shareholder after Alexander Forbes successfully launched an initial public offering. Mercer purchased its
stake in Alexander Forbes in two tranches at 7.50 South African Rand per share. In July 2014, the
Company purchased 14.9% of Alexander Forbes common shares for approximately $137 million. In
October 2014, the Company paid approximately $166 million for the remaining 19.1% of Alexander
Forbes common shares.
The Company’s investment in Alexander Forbes is accounted for using the equity method of accounting
and is included in other assets in the consolidated balance sheet. The Company records this investment
and its share of Alexander Forbes’ net income or loss on a one quarter lag basis.
Upon completion of the acquisition, the purchase price of the Alexander Forbes shares exceeded the
Company's share of the equity in net assets by approximately $146 million. The majority of this basis
difference resulted from the excess of the Company’s purchase price for the Alexander Forbes common
stock acquired over the book value of Alexander Forbes’ net assets. Substantially all of this basis
difference was allocated, based on our preliminary estimates of the fair values of Alexander Forbes’
assets and liabilities, to the value of investment contracts, customer contracts and relationships acquired
and technology related intangible assets, related deferred tax liability and goodwill. The basis difference
related to these intangible assets (excluding goodwill) is recorded as additional amortization expense
over their estimated lives. The basis difference related to the goodwill will be recognized upon disposition
of our investment. The Company is finalizing its purchase price allocation.
Alexander Forbes principally focuses on employee benefits and investment solutions for institutional
clients, and financial wellbeing and retail financial solutions for individual clients. Services include
retirement funds and investment consulting, actuarial and administration services, employee risk benefits
and health-care consulting, multi-manager investments solutions, and personal lines and business
insurance.
5. Discontinued Operations
As part of the disposal transactions for Putnam and Kroll, the Company provided certain indemnities,
primarily related to pre-transaction tax uncertainties and legal contingencies. In accordance with
applicable accounting guidance, liabilities were established related to these indemnities at the time of the
sales and reflected as a reduction of the gain on disposal. Discontinued operations includes charges or
credits resulting from the settlement or resolution of the indemnified matters, as well as adjustments to the
liabilities related to such matters.
On December 31, 2014, an agreement was reached between Putnam and the Massachusetts
Department of Revenue ("DOR") regarding a tax dispute, which was covered under the indemnity
agreement discussed above. The December 2014 agreement was subject to certain approvals, which
included the State Attorney General and the Commissioner of the DOR. In January 2015, all necessary
approvals were received, the agreement was executed and the tax was paid. Concurrently, Putnam and
the Company executed a settlement agreement to resolve all remaining matters under the indemnity
agreement. The Company recorded a gain, net of federal income taxes, of approximately $28 million in
2014 related to the settlement with Putnam.
Discontinued operations in 2013 includes estimated costs covered under the indemnity related to the Kroll
sale as well as tax indemnities related to the Putnam sale.
64
Summarized Statements of Income data for discontinued operations is as follows:
For the Years Ended December 31,
(In millions of dollars)
Income (loss) from discontinued operations, net of tax
Disposals of discontinued operations
Income tax (credit) expense
Disposals of discontinued operations, net of tax
Discontinued operations, net of tax
Discontinued operations, net of tax per share
– Basic
– Diluted
6. Goodwill and Other Intangibles
2014
2013
2012
$
$
$
$
— $
42
16
26
26
0.05
0.04
$
$
$
— $
(4)
(10)
6
6
0.01
0.01
$
$
$
—
(2)
1
(3)
(3)
—
—
The Company is required to assess goodwill and any indefinite-lived intangible assets for impairment
annually, or more frequently if circumstances indicate impairment may have occurred. The Company
performs the annual impairment assessment for each of its reporting units during the third quarter of each
year. In accordance with applicable accounting guidance, the Company assesses qualitative factors to
determine whether it is necessary to perform the two-step goodwill impairment test. The Company
considered numerous factors, which included that the fair value of each reporting unit exceeded its
carrying value by a substantial margin in its most recent estimate of reporting unit fair values, whether
significant acquisitions or dispositions occurred which might alter the fair value of its reporting units,
macroeconomic conditions and their potential impact on reporting unit fair values, actual performance
compared with budget and prior projections used in its estimation of reporting unit fair values, industry
and market conditions, and the year-over-year change in the Company’s share price. The Company
completed its qualitative assessment in the third quarter of 2014 and concluded that a two-step goodwill
impairment test was not required in 2014 and that goodwill was not impaired.
Other intangible assets that are not deemed to have an indefinite life are amortized over their estimated
lives and reviewed for impairment upon the occurrence of certain triggering events in accordance with
applicable accounting literature.
Changes in the carrying amount of goodwill are as follows:
(In millions of dollars)
Balance as of January 1, as reported
Goodwill acquired
Other adjustments(a)
Balance at December 31,
2014
$ 6,893
472
(124)
$ 7,241
2013
$ 6,792
113
(12)
$ 6,893
(a)
Primarily due to the impact of foreign exchange in both years.
The goodwill acquired of $472 million in 2014 (approximately $348 million of which is deductible for tax
purposes) is comprised of $445 million related to the Risk and Insurance Services segment and $27
million related to the Consulting segment.
Goodwill allocable to the Company’s reportable segments is as follows: Risk and Insurance Services, $5
billion and Consulting, $2.2 billion.
65
Amortized intangible assets consist primarily of the cost of client lists and trade names acquired. The
gross cost and accumulated amortization at December 31, 2014 and 2013 are as follows:
(In millions of dollars)
2014
2013
Gross
Cost
$ 1,177 $
Accumulated
Amortization
Net
Carrying
Amount
Gross
Cost
Accumulated
Amortization
Net
Carrying
Amount
Amortized intangibles
485 $
692 $
888 $
416 $
472
The Company recorded an intangible asset impairment charge of $5 million in the third quarter of 2013 in
the Risk & Insurance Services segment.
Aggregate amortization expense was $86 million for the year ended December 31, 2014, and $72 million
for the years ended December 31, 2013 and 2012, respectively. The estimated future aggregate
amortization expense is as follows:
For the Years Ending December 31,
(In millions of dollars)
2015
2016
2017
2018
2019
Subsequent years
$
$
88
78
75
73
72
306
692
66
7. Income Taxes
For financial reporting purposes, income before income taxes includes the following components:
For the Years Ended December 31,
(In millions of dollars)
Income before income taxes:
U.S.
Other
The expense (benefit) for income taxes is comprised of:
Income taxes:
Current–
U.S. Federal
Other national governments
U.S. state and local
Deferred–
U.S. Federal
Other national governments
U.S. state and local
Total income taxes
2014
2013
2012
$
313
1,744
$ 2,057
$
407
1,566
$ 1,973
$
398
1,298
$ 1,696
$
$
80
369
26
475
27
62
22
111
586
$
$
102
264
45
411
12
149
22
183
594
$
$
42
336
24
402
(18)
89
19
90
492
The significant components of deferred income tax assets and liabilities and their balance sheet
classifications are as follows:
December 31,
(In millions of dollars)
Deferred tax assets:
Accrued expenses not currently deductible
Differences related to non-U.S. operations (a)
Accrued retirement benefits U.S.
Net operating losses (b)
Income currently recognized for tax
Foreign tax credit carryforwards
Other
Deferred tax liabilities:
Differences related to non-U.S. operations
Depreciation and amortization
Accrued retirement & postretirement benefits - non-U.S. operations
Other
2014
2013
$
572
119
638
57
75
109
84
$ 1,654
$
570
140
297
79
74
157
90
$ 1,407
$131
307
41
5
484
$
$112
273
89
5
479
$
(a) Net of valuation allowances of $15 million in 2014 and $12 million in 2013.
(b) Net of valuation allowances of $82 million in 2014 and $70 million in 2013.
67
December 31,
(In millions of dollars)
Balance sheet classifications:
Current assets
Other assets
Current liabilities
Other liabilities
2014
2013
$
$
$
$
521
876
28
199
$
$
$
$
482
626
18
162
U.S. Federal income taxes are not provided on temporary differences with respect to investments in
foreign subsidiaries that are essentially permanent in duration, which at December 31, 2014, the
Company estimates, amounted to approximately $6.3 billion. The determination of the unrecognized
deferred tax liability with respect to these investments is not practicable.
A reconciliation from the U.S. Federal statutory income tax rate to the Company’s effective income tax
rate is shown below.
For the Years Ended December 31,
U.S. Federal statutory rate
U.S. state and local income taxes—net of U.S. Federal
income tax benefit
Differences related to non-U.S. operations
Other
Effective tax rate
2014
35.0%
1.7
(7.5)
(0.7)
28.5%
2013
35.0%
2.1
(6.0)
(1.0)
30.1%
2012
35.0%
1.9
(6.1)
(1.8)
29.0%
The Company’s consolidated tax rate was 28.5%, 30.1% and 29.0% in 2014, 2013 and 2012,
respectively. The tax rate in each year reflects foreign operations, which are generally taxed at rates lower
than the U.S. statutory tax rate.
Valuation allowances had net increases of $15 million, $10 million and $23 million in 2014, 2013 and
2012, respectively. During the respective years, adjustments of the beginning of the year balances of
valuation allowances decreased income tax expense by $9 million and $3 million in 2014 and 2013,
respectively, and increased income tax expense by $16 million in 2012. Approximately 55% of the
Company’s net operating loss carryforwards expire from 2015 through 2034, and others are unlimited.
The potential tax benefit from net operating loss carryforwards at the end of 2014 comprised federal, state
and local, and non-U.S. tax benefits of $3 million, $40 million and $96 million, respectively, before
reduction for valuation allowances. Foreign tax credit carryforwards expire from 2020 through 2022.
The realization of deferred tax assets depends on generating future taxable income during the periods in
which the tax benefits are deductible or creditable. Tax liabilities are determined and assessed
jurisdictionally by legal entity or filing group. Certain taxing jurisdictions allow or require combined or
consolidated tax filings. The Company assessed the realizability of its deferred tax assets and
considered all available evidence, including the existence of a recent history of losses, placing particular
weight on evidence that could be objectively verified. A valuation allowance was recorded to reduce
deferred tax assets to the amount that the Company believes is more likely than not to be realized.
68
Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended
December 31, 2014, 2013 and 2012:
(In millions of dollars)
Balance at January 1,
Additions, based on tax positions related to current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Lapses in statutes of limitation
Balance at December 31,
2014
128
13
3
(29)
(4)
(14)
97
$
$
2013
117
16
35
(7)
(3)
(30)
128
$
$
2012
143
26
35
(41)
(6)
(40)
117
$
$
Of the total unrecognized tax benefits at December 31, 2014, 2013 and 2012, $51 million, $71 million and
$96 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax
rate in any future periods. The total gross amount of accrued interest and penalties at December 31,
2014, 2013 and 2012, before any applicable federal benefit, was $7 million, $10 million and $13 million,
respectively.
As discussed in Note 5, the Company has provided certain indemnities related to contingent tax liabilities
as part of the disposals of Putnam and Kroll. At December 31, 2014, 2013 and 2012, $2 million, $2 million
and $6 million, respectively, included in the table above, relates to Putnam and Kroll positions included in
consolidated Company tax returns. Since the Company remains primarily liable to the taxing authorities
for resolution of uncertain tax positions related to consolidated returns, these balances will remain as part
of the Company’s consolidated liability for uncertain tax positions. Any future charges or credits related to
these matters, including interest accrued, will be recorded in discontinued operations as incurred.
The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S.
federal jurisdiction, the Company participates in the Internal Revenue Service’s (IRS) Compliance
Assurance Process (CAP), which is structured to conduct real-time compliance reviews. The IRS is
currently examining the Company’s 2013 tax return and performing a pre-filing review of 2014. During
2014, the Company settled its federal tax audit with the IRS for the year 2012, and in 2013 settled the
years 2007, and 2009 through 2011. The tax year 2008 was settled in a prior period. New York State and
New York City have examinations underway for various entities covering the years 2007 through 2012.
Illinois is auditing the Company for years 2009 through 2013. During 2014, California commenced an
audit covering the years 2009 through 2013. Outside the U.S., during 2014, examinations commenced in
Canada for the year 2012 and in France for years 2011 and 2012. There is an ongoing examination of
various subsidiaries for years 2011 and 2012 in the United Kingdom that started in 2013. The Company
regularly considers the likelihood of assessments in each of the taxing jurisdictions resulting from
examinations. The Company has established liabilities for uncertain tax positions in relation to the
potential assessments. The Company believes the resolution of tax matters will not have a material effect
on the consolidated financial position of the Company, although a resolution of tax matters could have a
material impact on the Company's net income or cash flows and on its effective tax rate in a particular
future period. It is reasonably possible that the total amount of unrecognized tax benefits will decrease
between zero and approximately $16 million within the next twelve months due to the settlement of audits
and the expiration of statutes of limitation.
69
8. Retirement Benefits
The Company maintains qualified and non-qualified defined benefit pension plans for its U.S. and non-
U.S. eligible employees. The Company’s policy for funding its tax qualified defined benefit retirement
plans is to contribute amounts at least sufficient to meet the funding requirements set forth by U.S. law
and the laws of the non-U.S. jurisdictions in which the Company offers defined benefit plans.
Combined U.S. and non-U.S. Plans
The weighted average actuarial assumptions utilized for the U.S. and significant non-U.S. defined benefit
plans and postretirement benefit plans are as follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Rate of compensation increase (for expense)
Discount rate (for benefit obligation)
Rate of compensation increase (for benefit
obligation)
Pension
Benefits
Postretirement
Benefits
2014
2013
2014
2013
4.82%
7.52%
2.64%
3.79%
4.38%
7.68%
2.43%
4.82%
4.92%
—
—
4.08%
4.32%
—
—
5.03%
2.42%
2.64%
—
—
The Company uses actuaries from Mercer, a subsidiary of the Company, to perform valuations of its
pension plans. The long-term rate of return on plan assets assumption is determined for each plan based
on the facts and circumstances that exist as of the measurement date, and the specific portfolio mix of
each plan’s assets. The Company utilizes a model developed by the Mercer actuaries to assist in the
determination of this assumption. The model takes into account several factors, including: actual and
target portfolio allocation; investment, administrative and trading expenses incurred directly by the plan
trust; historical portfolio performance; relevant forward-looking economic analysis; and expected returns,
variances and correlations for different asset classes. These measures are used to determine
probabilities using standard statistical techniques to calculate a range of expected returns on the portfolio.
The Company generally does not adjust the rate of return assumption from year to year if, at the
measurement date, it is within the range between the 25th and 75th percentile of the expected long-term
annual returns. Historical long-term average asset returns of each plan are also reviewed to determine
whether they are consistent and reasonable compared with the rate selected. The expected return on
plan assets is determined by applying the assumed long-term rate of return to the market-related value of
plan assets. This market-related value recognizes investment gains or losses over a five-year period from
the year in which they occur. Investment gains or losses for this purpose are the difference between the
expected return calculated using the market-related value of assets and the actual return based on the
market value of assets. Since the market-related value of assets recognizes gains or losses over a five-
year period, the future market-related value of the assets will be impacted as previously deferred gains or
losses are reflected.
The target asset allocation for the U.S. Plan is 62% equities and equity alternatives and 38% fixed
income. At the end of 2014, the actual allocation for the U.S. Plan was 59% equities and equity
alternatives and 41% fixed income. The target asset allocation for the U.K. Plans, which comprise
approximately 83% of non-U.S. Plan assets, is 50% equities and equity alternatives and 50% fixed
income. At the end of 2014, the actual allocation for the U.K. Plans was 43% equities and equity
alternatives and 57% fixed income. The assets of the Company's defined benefit plans are diversified and
are managed in accordance with applicable laws and with the goal of maximizing the plans' real return
within acceptable risk parameters. The Company uses threshold-based portfolio re-balancing to ensure
the actual portfolio remains consistent with target asset allocation ranges.
The discount rate selected for each U.S. plan is based on a model bond portfolio with coupons and
redemptions that closely match the expected liability cash flows from the plan. Discount rates for non-U.S.
plans are based on appropriate bond indices such as the Markit iBoxx £ Corporates AA 15+ index in the
U.K. Projected compensation increases reflect current expectations as to future levels of inflation.
70
The components of the net periodic benefit cost for defined benefit and other postretirement plans are as
follows:
Combined U.S. and significant non-U.S. Plans
For the Years Ended December 31,
Pension
Benefits
(In millions of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Recognized actuarial loss (credit)
Net periodic benefit cost
Curtailment gain
Total cost
Plan Assets
2014
2013
$ 213 $ 252 $ 240 $
581
2012
596
641
(990)
(911)
(905)
(16)
243
(22)
315
(19)
270
$
$
91 $ 215 $ 182 $
(65)
26 $ 215 $ 182 $
—
—
Postretirement
Benefits
2014
2013
2012
4 $
5 $
11
—
—
(1)
14 $
—
14 $
11
—
—
2
18 $
—
18 $
5
13
—
(14)
—
4
—
4
For the U.S. Plan, investment allocation decisions are made by a fiduciary committee composed of senior
executives appointed by the Company’s Chief Executive Officer. For the non-U.S. plans, investment
allocation decisions are made by local fiduciaries, in consultation with the Company for the larger plans.
Plan assets are invested in a manner consistent with the fiduciary standards set forth in all relevant laws
relating to pensions and trusts in each country. Primary investment objectives are (1) to achieve an
investment return that, in combination with current and future contributions, will provide sufficient funds to
pay benefits as they become due, and (2) to minimize the risk of large losses. The investment allocations
are designed to meet these objectives by broadly diversifying plan assets among numerous asset classes
with differing expected returns, volatilities, and correlations.
The major categories of plan assets include equity securities, equity alternative investments, and fixed
income securities. For the U.S. qualified plan, the category ranges are 57-67% for equities and equity
alternatives, and 33-43% for fixed income. For the U.K. Plan, the category ranges are 47-53% for equities
and equity alternatives, and 47-53% for fixed income. Asset allocation is monitored frequently and re-
balancing actions are taken as appropriate. Re-balancing in the U.K. Plan was suspended in 2014 while a
contingent guarantee agreement was put in place and the investment strategy of the plan was finalized.
After the contingent guarantee agreement was executed in January 2015, re-balancing resumed in
February 2015 with target asset allocation of 48% equities and equity alternatives and 52% fixed income.
Plan investments are exposed to stock market, interest rate, and credit risk. Concentrations of these risks
are generally limited due to diversification by investment style within each asset class, diversification by
investment manager, diversification by industry sectors and issuers, and the dispersion of investments
across many geographic areas.
Unrecognized Actuarial Gains/Losses
In accordance with applicable accounting guidance, the funded status of the Company's pension plans is
recorded in the consolidated balance sheets and provides for a delayed recognition of actuarial gains or
losses arising from changes in the projected benefit obligation due to changes in the assumed discount
rates, differences between the actual and expected value of plan assets and other assumption changes.
The unrecognized pension plan actuarial gains or losses and prior service costs not yet recognized in net
periodic pension cost are recognized in Accumulated Other Comprehensive Income, net of tax. These
gains and losses are amortized prospectively out of AOCI over a period that approximates the average
remaining service period of active employees, or for plans in which substantially all the participants are
inactive, over the remaining life expectancy of the inactive employees.
71
U.S. Plans
The following schedules provide information concerning the Company’s U.S. defined benefit pension
plans and postretirement benefit plans:
U.S. Pension
Benefits
U.S. Postretirement
Benefits
2014
2013
2014
2013
(In millions of dollars)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Plan amendments
Plan combination
Actuarial loss (gain)
Medicare Part D subsidy
Benefits paid
Benefit obligation, December 31
Change in plan assets:
Fair value of plan assets at beginning of year
Plan combination
Actual return on plan assets
Employer contributions
Employee contributions
Medicare Part D subsidy
Benefits paid
Other
Fair value of plan assets, December 31
Net funded status, December 31
Amounts recognized in the consolidated balance
sheets:
Current liabilities
Noncurrent liabilities
Net liability recognized, December 31
Amounts recognized in other comprehensive income
(loss):
Prior service credit
Net actuarial (loss) gain
Total recognized accumulated other comprehensive
(loss) income, December 31
$
$
$
$
$
$
$
$
4,827 $
91
253
—
—
—
955
—
(202)
5,924 $
4,279 $
—
414
25
—
—
(202)
—
4,516 $
(1,408) $
5,197 $
104
229
—
—
36
(547)
—
(192)
4,827 $
3,936 $
21
488
26
—
—
(192)
—
4,279 $
(548) $
158 $
2
7
13
(4)
—
21
1
(21)
177 $
— $
—
—
13
13
1
(21)
12
18 $
(159) $
(25) $
(1,383)
(1,408) $
(24) $
(524)
(548) $
(2) $
(157)
(159) $
— $
7 $
(1,749)
(974)
$
(1,749) $
(967) $
4 $
2
6 $
176
3
7
—
—
—
(15)
1
(14)
158
—
—
—
13
—
1
(14)
—
—
(158)
(8)
(150)
(158)
—
13
13
Cumulative employer contributions in excess
(deficient) of net periodic cost
Net amount recognized in consolidated balance sheet $
Accumulated benefit obligation at December 31
$
341
(1,408) $
5,825 $
419
(548) $
4,753 $
(165)
(159) $
— $
(171)
(158)
—
72
(In millions of dollars)
Reconciliation of prior service credit (cost) recognized
in accumulated other comprehensive income (loss):
Beginning balance
Recognized as component of net periodic benefit cost
Plan amendment
Prior service credit, December 31
(In millions of dollars)
Reconciliation of net actuarial gain (loss) recognized
in accumulated other comprehensive income (loss):
U.S. Pension
Benefits
U.S. Postretirement
Benefits
2014
2013
2014
2013
$
$
7 $
(7)
—
— $
23 $
(16)
—
7 $
— $
—
4
4 $
—
—
—
—
U.S. Pension
Benefits
U.S. Postretirement
Benefits
2014
2013
2014
2013
Beginning balance
$
(974) $
(1,887) $
13 $
Recognized as component of net periodic benefit cost
(credit)
Changes in plan assets and benefit obligations
recognized in other comprehensive income (loss):
Liability experience
Asset experience
112
208
(2)
(955)
68
541
164
(21)
12
Total (loss) gain recognized as change in plan assets
and benefit obligations
Net actuarial (loss) gain, December 31
(887)
(1,749) $
$
705
(974) $
(9)
2 $
(2)
—
15
—
15
13
For the Years Ended December 31,
(In millions of dollars)
Total recognized in net periodic benefit cost
and other comprehensive loss (income)
U.S. Pension
Benefits
2013
2014
2012
U.S. Postretirement
Benefits
2013
2014
2012
$
885 $ (696) $
346 $
14 $
(5) $
24
Estimated amounts that will be amortized from accumulated other comprehensive loss in the next fiscal
year:
(In millions of dollars)
Prior service credit
Net actuarial loss
Projected cost
U.S. Pension
Benefits
U.S. Postretirement
Benefits
2015
— $
181
181
$
2015
1
1
2
$
$
73
The weighted average actuarial assumptions utilized in determining the above amounts for the U.S.
defined benefit and other U.S. postretirement plans as of the end of the year are as follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Rate of compensation increase (for expense)
Discount rate (for benefit obligation)
Rate of compensation increase (for benefit obligation)
U.S. Pension
Benefits
U.S. Postretirement
Benefits
2014
2013
2014
2013
5.30%
8.75%
2.00%
4.30%
2.00%
4.45%
8.75%
2.00%
5.30%
2.00%
4.99%
—
—
4.19%
—
4.25%
—
—
5.17%
—
In 2014, the Society of Actuaries in the United States issued a new mortality table (RP-2014) and an
updated improvement scale. The Company considered the effect of RP-2014, along with other available
information on mortality improvement and industry specific mortality studies, to select its assumptions for
measurement of the plans’ benefit obligations at December 31, 2014.
The projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets
for U.S. pension plans with accumulated benefit obligations in excess of plan assets were $5.9 billion,
$5.8 billion and $4.5 billion, respectively, as of December 31, 2014 and $4.8 billion, $4.8 billion and $4.3
billion, respectively, as of December 31, 2013.
The projected benefit obligation and fair value of plan assets for U.S. pension plans with projected benefit
obligations in excess of plan assets was $5.9 billion and $4.5 billion, respectively, as of December 31,
2014 and $4.8 billion and $4.3 billion, respectively, as of December 31, 2013.
As of December 31, 2014, the U.S. qualified plan holds 4 million shares of the Company’s common stock
which were contributed to the Plan by the Company in 2005. This represented approximately 5.1% of that
plan’s assets as of December 31, 2014. In addition, plan assets may be invested in funds managed by
Mercer Investments, a subsidiary of the Company.
The components of the net periodic benefit cost for the U.S. defined benefit and other postretirement
benefit plans are as follows:
U.S. Plans only
For the Years Ended December 31,
(In millions of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Recognized actuarial loss (credit)
Net periodic benefit cost (credit)
Pension
Benefits
2013
2014
$
$
91 $
253
(346)
(7)
112
103 $
104 $
229
(324)
(16)
207
200 $
Postretirement
Benefits
2013
2014
2 $
7
—
—
(2)
7 $
3 $
7
—
—
—
10 $
2012
3
8
—
(13)
(1)
(3)
2012
93 $
230
(322)
(16)
152
137 $
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 became
law. The net periodic benefit cost for all periods shown above includes the subsidy.
The assumed health care cost trend rate for Medicare eligibles and non-Medicare eligibles is
approximately 7.55% in 2014, gradually declining to 4.5% in 2028. Assumed health care cost trend rates
have a small effect on the amounts reported for the U.S. health care plans because the Company caps its
share of health care trend at 5%. A one percentage point change in assumed health care cost trend rates
would have no effect on the total service and interest cost components or the postretirement benefit
obligation.
Estimated Future Contributions
The Company expects to fund approximately $25 million for its U.S. non-qualified plans in 2015. The
Company’s policy for funding its tax-qualified defined benefit retirement plans is to contribute amounts at
least sufficient to meet the funding requirements set forth in the U.S. and applicable foreign law. There is
currently no ERISA funding requirement for the U.S. qualified plan for 2015.
74
Non-U.S. Plans
The following schedules provide information concerning the Company’s non-U.S. defined benefit pension
plans and non-U.S. postretirement benefit plans:
(In millions of dollars)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Actuarial loss (gain)
Plan amendments
Effect of settlement
Benefits paid
Foreign currency changes
Other
Benefit obligation December 31
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Effect of settlement
Company contributions
Employee contributions
Benefits paid
Foreign currency changes
Other
Fair value of plan assets, December 31
Net funded status, December 31
Amounts recognized in the consolidated balance
sheets:
Non-current assets
Current liabilities
Non-current liabilities
Net asset (liability) recognized, December 31
Amounts recognized in other comprehensive
(loss) income:
Prior service (cost) credit
Net actuarial loss
Total recognized accumulated other
comprehensive (loss) income, December 31
Cumulative employer contributions in excess
(deficient) of net periodic cost
Net asset (liability) recognized in consolidated
balance sheet, December 31
Accumulated benefit obligation, December 31
Non-U.S. Pension
Benefits
2014
2013
Non-U.S.
Postretirement Benefits
2013
2014
8,711 $
122
388
10
1,619
13
(11)
(311)
(585)
62
10,018 $
9,351 $
1,756
(11)
156
10
(311)
(578)
37
10,410 $
392 $
8,579 $
148
352
11
(53)
—
(2)
(293)
(31)
—
8,711 $
8,312 $
698
(2)
620
11
(293)
5
—
9,351 $
640 $
967 $
(6)
(569)
392 $
977 $
(5)
(332)
640 $
97 $
2
4
—
(1)
—
—
(3)
(6)
—
93 $
— $
—
—
3
—
(3)
—
—
— $
(93) $
— $
(4)
(89)
(93) $
(2) $
85 $
(3,215)
(3,010)
— $
(14)
(3,217) $
(2,925) $
(14) $
3,609
3,565
(79)
392 $
9,731 $
640 $
8,413 $
(93) $
— $
107
2
4
—
(8)
—
—
(4)
(4)
—
97
—
—
—
4
—
(4)
—
—
—
(97)
—
(4)
(93)
(97)
—
(16)
(16)
(81)
(97)
—
$
$
$
$
$
$
$
$
$
$
$
75
(In millions of dollars)
Reconciliation of prior service credit (cost):
Non-U.S. Pension
Benefits
Non-U.S.
Postretirement Benefits
2014
2013
2014
2013
Beginning balance
$
85 $
93 $
— $
Recognized as component of net periodic
benefit credit
Effect of curtailment
Changes in plan assets and benefit obligations
recognized in other comprehensive income:
Plan amendments
Exchange rate adjustments
Prior service (cost) credit, December 31
$
(9)
(65)
(13)
—
(2) $
(6)
—
—
(2)
85 $
—
—
—
—
— $
—
—
—
—
—
—
(In millions of dollars)
Reconciliation of net actuarial (loss) gain:
Non-U.S. Pension
Benefits
Non-U.S.
Postretirement Benefits
2014
2013
2014
2013
Beginning balance
$
(3,010) $
(3,309) $
(16) $
(27)
Recognized as component of net periodic
benefit cost
Effect of settlement
Changes in plan assets and benefit obligations
recognized in other comprehensive (loss)
income:
Liability experience
Asset experience
Other
131
—
(1,619)
1,112
(14)
Total amount recognized as change in plan
assets and benefit obligations
Exchange rate adjustments
Net actuarial loss, December 31
(521)
185
(3,215) $
$
108
—
53
111
—
164
1
—
1
—
—
1
27
(3,010) $
—
(14) $
2
—
8
—
—
8
1
(16)
For the Years Ended December 31,
(In millions of dollars)
Total recognized in net periodic benefit
cost and other comprehensive loss
(income)
Non-U.S. Pension
Benefits
2013
2014
2012
Non-U.S. Postretirement
Benefits
2013
2014
2012
$
201 $ (276) $
246 $
5 $
(2) $
16
Estimated amounts that will be amortized from accumulated other comprehensive income in the next
fiscal year:
(In millions of dollars)
Prior service credit
Net actuarial loss
Projected cost
Non-U.S.
Pension
Benefits
Non-U.S.
Postretirement
Benefits
2015
(2) $
140
138
$
2015
—
1
1
$
$
76
The weighted average actuarial assumptions utilized for the non-U.S. defined and postretirement benefit
plans as of the end of the year are as follows:
Weighted average assumptions:
Discount rate (for expense)
Expected return on plan assets
Rate of compensation increase (for expense)
Discount rate (for benefit obligation)
Rate of compensation increase (for benefit
obligation)
Non-U.S. Pension
Benefits
Non-U.S.
Postretirement Benefits
2014
2013
2014
2013
4.55%
6.95%
2.99%
3.49%
2.67%
4.33%
7.17%
2.69%
4.55%
2.99%
4.80%
—
—
3.85%
—
4.45%
—
—
4.80%
—
The non-U.S. defined benefit plans do not have any direct ownership of the Company’s common stock.
The pension plan in the United Kingdom holds a limited partnership interest in the Trident III private equity
fund valued at approximately $53 million at December 31, 2014.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the non-
U.S. pension plans with accumulated benefit obligations in excess of plan assets were $2.1 billion, $2.0
billion and $1.6 billion, respectively, as of December 31, 2014 and $1.7 billion, $1.5 billion and $1.3 billion,
respectively, as of December 31, 2013.
The projected benefit obligation and fair value of plan assets for non-U.S. pension plans with projected
benefit obligations in excess of plan assets was $2.2 billion and $1.6 billion, respectively, as of
December 31, 2014 and $1.7 billion and $1.3 billion, respectively, as of December 31, 2013.
U.K. Plan Amendment
After completion of a consultation period with affected colleagues, in January 2014, the Company
amended its U.K. defined benefit pension plans to close those plans to future benefit accruals effective
August 1, 2014 and replaced those plans, along with its existing defined contribution plans, with a new,
comprehensive defined contribution arrangement. This change resulted in a curtailment of the U.K.
defined benefit plans and, as required under GAAP, the Company re-measured the defined benefit plans’
assets and liabilities at the date the employee consultations concluded and the local operating companies
approved the plan amendment, based on assumptions and market conditions at that date. As a result of
the re-measurement, the projected benefit obligation ("PBO") increased by approximately $147 million
and the funded status decreased by approximately $137 million. The change in the PBO and in the
funded status relates primarily to a decrease in the discount rate at the re-measurement date. The net
periodic benefit costs recognized in 2014 are the weighted average resulting from the December 31, 2013
measurement and the January 2014 re-measurement.
77
Components of Net Periodic Benefits Costs
The components of the net periodic benefit cost for the non-U.S. defined benefit and other postretirement
benefit plans and the curtailment, settlement and termination expenses are as follows:
For the Years Ended December 31,
(In millions of dollars)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Net periodic benefit (credit) cost
Settlement loss
Curtailment gain
Total (credit) cost
Non-U.S. Pension
Benefits
Non-U.S. Postretirement
Benefits
2014
2013
2012
2014
2013
2012
$
$
122 $
388
(644)
(9)
131
(12)
—
(65)
(77) $
148 $
352
(587)
(6)
108
15
—
—
15 $
147 $
366
2 $
4
(583)
(3)
118
45
1
—
—
1
7
—
(1)
45 $
—
7 $
2 $
4
—
—
2
8
—
—
8 $
2
5
—
(1)
1
7
—
—
7
The assumed health care cost trend rate was approximately 5.76% in 2014, gradually declining to 4.92%
in 2022. Assumed health care cost trend rates can have a significant effect on the amounts reported for
the non-U.S. health care plans. A one percentage point change in assumed health care cost trend rates
would have the following effects:
(In millions of dollars)
Effect on total of service and interest cost components
Effect on postretirement benefit obligation
Estimated Future Contributions
1 Percentage
Point Increase
1
$
9
$
1 Percentage
Point Decrease
(1)
$
(7)
$
The Company expects to fund approximately $169 million to its non-U.S. pension plans in 2015. Funding
requirements for non-U.S. plans vary by country. Contribution rates are generally based on local funding
practices and requirements, which may differ significantly from measurements under U.S. GAAP.
Funding amounts may be influenced by future asset performance, the level of discount rates and other
variables impacting the assets and/or liabilities of the plan. Discretionary contributions may also be
affected by alternative uses of the Company’s cash flows, including dividends, investments and share
repurchases.
In the U.K., contributions to defined benefit pension plans are determined through a negotiation process
between the Company and the plans' Trustee that typically occurs every three years in conjunction with
the actuarial valuation of the plans. This process is governed by U.K. pension regulations. The
assumptions that result from the funding negotiations are different from those used for U.S. GAAP and
currently result in a lower funded status than under U.S. GAAP. In March 2014, the Company and the
Trustee of the U.K. Defined Benefits Plans agreed to a funding deficit recovery plan for the U.K. defined
benefit pension plans. The current agreement with the Trustee sets out the annual deficit contributions
which would be due based on the deficit at December 31, 2012. The funding level is subject to re-
assessment, in most cases on November 1st of each year. If the funding level on November 1st has
sufficiently improved, no deficit funding contributions will be required in the following year, and the
contribution amount will be deferred. As part of a long-term strategy, which depends on having greater
influence over asset allocation and overall investment decisions, the Company has agreed to support
annual deficit contributions by the U.K. operating companies under certain circumstances, up to GBP 450
million over a seven-year period.
78
Estimated Future Benefit Payments
The Plans' estimated future benefit payments for its pension and postretirement benefits (without
reduction for Medicare subsidy receipts) are as follows:
For the Years Ended December 31,
(In millions of dollars)
2015
2016
2017
2018
2019
2020-2024
Pension
Benefits
Postretirement
Benefits
U.S.
217
232
250
263
275
1,581
$
$
$
$
$
$
Non-U.S.
264
$
280
$
295
$
312
$
325
$
1,890
$
$
$
$
$
$
$
U.S.
Non-U.S.
4
$
4
$
4
$
4
$
4
$
24
$
10
10
10
10
10
55
Defined Benefit Plans Fair Value Disclosures
In December 2008, the FASB issued guidance for Employers’ Disclosures About Pension and Other Post
Retirement Benefit Plan Assets. The guidance requires fair value plan asset disclosures for an employer’s
defined benefit pension and postretirement plans similar to the guidance on Fair Value Measurements as
well as (a) how investment allocation decisions are made, (b) the major categories of plan assets, and
(c) significant concentrations of risk within plan assets.
The U.S. and non-U.S. plan investments are classified into Level 1, which refers to investments valued
using quoted prices from active markets for identical assets; Level 2, which refers to investments not
traded on an active market but for which observable market inputs are readily available; and Level 3,
which refers to investments valued based on significant unobservable inputs. Assets and liabilities are
classified in their entirety based on the lowest level of input that is significant to the fair value
measurement.
79
The following table sets forth, by level within the fair value hierarchy, a summary of the U.S. and non-U.S.
plans' investments measured at fair value on a recurring basis at December 31, 2014 and 2013:
Assets (In millions of dollars)
Common/Collective trusts
Corporate obligations
Corporate stocks
Private equity/partnerships
Government securities
Real estate
Short-term investment funds
Company common stock
Other investments
Total investments
Assets (In millions of dollars)
Common/Collective trusts
Corporate obligations
Corporate stocks
Private equity/partnerships
Government securities
Real estate
Short-term investment funds
Company common stock
Other investments
Total investments
Fair Value Measurements at December 31, 2014
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
172 $
—
2,087
—
—
—
724
229
16
3,228 $
6,766 $
2,938
6
—
371
6
12
—
23
10,122 $
184 $
3
1
727
—
375
—
—
239
1,529 $
Fair Value Measurements at December 31, 2013
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
138 $
—
2,434
—
10
—
824
261
35
3,702 $
5,649 $
2,330
5
2
340
7
15
—
5
8,353 $
151 $
4
1
799
2
312
—
—
238
1,507 $
Total
7,122
2,941
2,094
727
371
381
736
229
278
14,879
Total
5,938
2,334
2,440
801
352
319
839
261
278
13,562
In 2014, certain non U.S. government securities that were previously categorized as Level 1 were
transferred to Level 2.
80
The tables below set forth a summary of changes in the fair value of the plans’ Level 3 assets for the
years ended December 31, 2014 and December 31, 2013:
Assets (In
millions)
Private equity/
Partnerships
Real estate
Other
investments
Common/
Collective trusts
Corporate stocks
Corporate
obligations
Government
securities
Total assets
Assets (In
millions)
Private equity/
Partnerships
Real estate
Other
investments
Common/
Collective trusts
Corporate stocks
Corporate
obligations
Government
securities
Total assets
$
Fair Value,
January 1,
2014
Purchases Sales
Unrealized
Gain/
(Loss)
Realized
Gain/
(Loss)
Exchange
Rate
Impact
Transfers
in/(out)
and
Other
Fair
Value,
December
31, 2014
$
799
312
238
151
1
4
2
$
158
$ (185) $
(173) $
137
$
(12) $
97
21
—
—
3
—
(50)
(16)
(1)
—
(1)
—
19
18
50
—
—
—
16
—
—
—
—
—
(19)
(28)
(16)
—
—
—
$
3
—
6
—
—
(3)
(2)
727
375
239
184
1
3
—
$
1,507
$
279
$ (253) $
(86) $
153
$
(75) $
4
$
1,529
Fair Value,
January 1,
2013
Purchases Sales
Unrealized
Gain/
(Loss)
Realized
Gain/
(Loss)
Exchange
Rate
Impact
Transfers
in/(out)
and
Other
Fair
Value,
December
31, 2013
$
824
357
239
—
9
1
—
1,430
$
146
$ (174) $
(155) $
150
$
(1) $
21
18
61
—
1
—
(95)
(13)
—
—
—
—
6
10
(4)
—
—
(1)
26
—
—
—
—
—
(3)
6
(5)
—
—
—
$
9
—
(22)
99
(8)
2
3
799
312
238
151
1
4
2
$
247
$ (282) $
(144) $
176
$
(3) $
83
$
1,507
The following is a description of the valuation methodologies used for assets measured at fair value:
Company common stock: Valued at the closing price reported on the New York Stock Exchange.
Common stocks, preferred stocks, convertible equity securities and rights/warrants (included in Corporate
stocks): Valued at the closing price reported on the primary exchange.
Corporate bonds (included in Corporate obligations): The fair value of corporate bonds is estimated using
recently executed transactions, market price quotations (where observable) and bond spreads. The
spread data used are for the same maturity as the bond. If the spread data does not reference the issuer,
then data that references a comparable issuer are used. When observable price quotations are not
available, fair value is determined based on cash flow models.
Commercial paper (included in Corporate obligations): The fair value of commercial paper is estimated
using observable market data such as maturity date, issue date, credit rating, current commercial paper
rates and settlement date.
Commercial mortgage-backed and asset-backed securities (included in Corporate obligations): Fair
value is determined using discounted cash flow models. Observable inputs are based on trade and quote
activity of bonds with similar features including issuer vintage, purpose of underlying loan (first or second
lien), prepayment speeds and credit ratings. The discount rate is the combination of the appropriate rate
from the benchmark yield curve and the discount margin based on quoted prices.
81
Common/Collective trusts: Valued at the quoted market prices of the investments at year end.
U.S. government bonds (included in Government securities): The fair value of U.S. government bonds is
estimated by pricing models that utilize observable market data including quotes, spreads and data points
for yield curves.
U.S. agency securities (included in Government securities): U.S. agency securities are comprised of two
main categories consisting of agency issued debt and mortgage pass-throughs. Agency issued debt
securities are valued by benchmarking market-derived prices to quoted market prices and trade data for
identical or comparable securities. Mortgage pass-throughs include certain “To-be-announced” (TBA)
securities and mortgage pass-through pools. TBA securities are generally valued using quoted market
prices or are benchmarked thereto. Fair value of mortgage pass-through pools are model driven with
respect to spreads of the comparable TBA security.
Private equity and real estate partnerships: Investments in private equity and real estate partnerships are
valued based on the fair value reported by the manager of the corresponding partnership. The managers
provide unaudited quarterly financial statements and audited annual financial statements which set forth
the value of the fund. The valuations obtained from the managers are based on various analyses on the
underlying holdings in each partnership, including financial valuation models and projections, comparable
valuations from the public markets, and precedent private market transactions. Investments are valued in
the accompanying financial statements based on the Plan’s beneficial interest in the underlying net assets
of the partnership as determined by the partnership agreement.
Insurance group annuity contracts: The fair values for these investments are based on the current market
value of the aggregate accumulated contributions plus interest earned.
Swap assets and liabilities: Fair values for interest rate swaps, equity index swaps and inflation swaps
are estimated using a discounted cash flow pricing model. These models use observable market data
such as contractual fixed rate, broker quotes, spot equity price or index value and dividend data. The fair
values of credit default swaps are estimated using an income approach model which determines
expected cash flows based on default probabilities from the issuer-specific credit spread curve and credit
loss recovery rates, both of which are dependent on market quotes.
Real estate investment trusts: Valued at the closing price reported on an exchange.
Short-term investment funds: Primarily high-grade money market instruments valued at net asset value
at year-end.
Real estate: Valued by investment managers generally using proprietary pricing models.
Registered investment companies: Valued at the closing price reported on the primary exchange.
Defined Contribution Plans
The Company maintains certain defined contribution plans for its employees, including the Marsh &
McLennan Companies 401(k) Savings & Investment Plan (“401(k) Plan”), that are qualified under U.S. tax
laws. Under these plans, eligible employees may contribute a percentage of their base salary, subject to
certain limitations. For the 401(k) Plan, the Company matches a fixed portion of the employees’
contributions. The 401(k) Plan contains an Employee Stock Ownership Plan feature under U.S. tax law.
Approximately $453 million of the 401(k) Plan’s assets at both December 31, 2014 and December 31,
2013 were invested in the Company’s common stock. If a participant does not choose an investment
direction for his or her future contributions, they are automatically invested in a BlackRock LifePath
Portfolio that most closely matches the participant’s expected retirement year. The cost of these defined
contribution plans was $49 million in 2014, $50 million in 2013 and $50 million in 2012. In addition, the
Company has a significant defined contribution plan in the U.K. As noted above, effective August 1, 2014,
a newly formed defined contribution plan replaced the existing defined contribution and defined benefit
plans with regard to future service. The cost of the U.K. defined contribution plan was $65 million, $23
million and $21 million in 2014, 2013 and 2012, respectively.
82
9.
Stock Benefit Plans
The Company maintains multiple stock-based payment arrangements under which employees are
awarded grants of restricted stock units, stock options and other forms of stock-based payment
arrangements.
Marsh & McLennan Companies, Inc. Incentive and Stock Award Plans
On May 19, 2011, the Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (the
“2011 Plan”) was approved by the Company's stockholders. The 2011 Plan replaced the Company's two
previous equity incentive plans (the 2000 Senior Executive Incentive and Stock Award Plan and the 2000
Employee Incentive and Stock Award Plan).
The types of awards permitted under the 2011 Plan include stock options, restricted stock and restricted
stock units payable in Company common stock or cash, and other stock-based and performance-based
awards. The Compensation Committee of the Board of Directors (the “Compensation Committee”)
determines, at its discretion, which affiliates may participate in the 2011 Plan, which eligible employees
will receive awards, the types of awards to be received, and the terms and conditions thereof. The right of
an employee to receive an award may be subject to performance conditions as specified by the
Compensation Committee. The 2011 Plan contains provisions which, in the event of a change in control
of the Company, may accelerate the vesting of the awards. The 2011 Plan retains the remaining share
authority of the two previous plans as of the date the 2011 Plan was approved by stockholders. Awards
relating to not more than approximately 23.2 million shares of common stock, plus shares remaining
unused under certain pre-existing plans, may be made over the life of the 2011 Plan.
Our current practice is to grant non-qualified stock options, restricted stock units and/or performance
stock units on an annual basis to senior executives and a limited number of other employees as part of
their total compensation. We also grant restricted stock units during the year to new hires or as retention
awards for certain employees. We have not granted restricted stock since 2005.
Stock Options: Options granted under the 2011 Plan may be designated as either incentive stock options
or non-qualified stock options. The Compensation Committee determines the terms and conditions of the
option, including the time or times at which an option may be exercised, the methods by which such
exercise price may be paid, and the form of such payment. Options are generally granted with an
exercise price equal to the market value of the Company's common stock on the date of grant. These
option awards generally vest 25% per annum and have a contractual term of 10 years.
The estimated fair value of options granted is calculated using the Black-Scholes option pricing valuation
model. This model takes into account several factors and assumptions. The risk-free interest rate is
based on the yield on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life
assumption at the time of grant. The expected life (estimated period of time outstanding) is estimated
using the contractual term of the option and the effects of employees' expected exercise and post-vesting
employment termination behavior. The Company uses a blended volatility rate based on the following: (i)
volatility derived from daily closing price observations for the 10-year period ended on the valuation date,
(ii) implied volatility derived from traded options for the period one week before the valuation date and (iii)
average volatility for the 10-year periods ended on 15 anniversaries prior to the valuation date, using daily
closing price observations. The expected dividend yield is based on expected dividends for the expected
term of the stock options.
The assumptions used in the Black-Scholes option pricing valuation model for options granted by the
Company in 2014, 2013 and 2012 are as follows:
Risk-free interest rate
Expected life (in years)
Expected volatility
Expected dividend yield
2013
1.03%-1.30%
6.0
23.6%-24.1%
2.48%-2.54%
2012
1.26%-1.27%
6.50
26.2%-26.4%
2.76%-2.80%
2014
1.88%
6.0
24.2%
2.08%
83
A summary of the status of the Company’s stock option awards as of December 31, 2014 and changes
during the year then ended is presented below:
Balance at January 1, 2014
Granted
Exercised
Forfeited
Expired
Balance at December 31, 2014
Options vested or expected to vest
at December 31, 2014
Options exercisable at
December 31, 2014
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
($000)
29.29
48.00
29.39
35.76
32.98
30.97
5.1 years $
488,937
Shares
22,567,866 $
1,716,637 $
(6,060,823) $
(149,501) $
(79,097) $
17,995,082 $
17,709,073 $
30.90
5.1 years $
482,479
12,440,781 $
27.74
3.9 years $
378,296
In the above table, forfeited options are unvested options whose requisite service period has not been
met. Expired options are vested options that were not exercised. The weighted-average grant-date fair
value of the Company's option awards granted during the years ended December 31, 2014, 2013 and
2012 was $9.66, $6.21 and $6.04, respectively. The total intrinsic value of options exercised during the
same periods was $174.3 million, $198.1 million and $57.7 million, respectively.
As of December 31, 2014, there was $16 million of unrecognized compensation cost related to the
Company's option awards. The weighted-average period over which that cost is expected to be
recognized is approximately 1.05 years. Cash received from the exercise of stock options for the years
ended December 31, 2014, 2013 and 2012 was $178.1 million, $281.1 million and $179.3 million,
respectively.
The Company's policy is to issue treasury shares upon option exercises or share unit conversion. The
Company intends to issue treasury shares as long as an adequate number of those shares is available.
Restricted Stock Units and Performance Stock Units: Restricted stock units may be awarded under the
Company's 2011 Incentive and Stock Award Plan. The Compensation Committee determines the
restrictions on such units, when the restrictions lapse, when the units vest and are paid, and under what
terms the units are forfeited. The cost of these awards is amortized over the vesting period, which is
generally three years. Awards to senior executives and other employees may include three-year
performance-based restricted stock units and three-year service-based restricted stock units. The payout
of performance stock units (payable in shares of the Company's common stock) may range, generally,
from 0-200% of the number of units granted, based on the achievement of objective, pre-determined
Company or operating company performance measures, generally, over a three-year performance period.
The Company accounts for these awards as performance condition restricted stock units. The
performance condition is not considered in the determination of grant date fair value of such awards.
Compensation cost is recognized over the performance period based on management's estimate of the
number of units expected to vest and is adjusted to reflect the actual number of shares paid out at the
end of the three-year performance period. Dividend equivalents are not paid out unless and until such
time that the award vests.
84
A summary of the status of the Company's restricted stock units and performance stock units ("PSU's") as
of December 31, 2014 and changes during the period then ended is presented below:
Non-vested balance at January 1, 2014
Granted
Vested
Forfeited
Adjustment due to performance
Non-vested balance at December 31, 2014
Restricted Stock Units
Weighted
Average
Grant Date
Fair Value
32.04
48.16
31.23
34.85
—
38.74
Shares
4,250,809 $
753,213 $
(2,779,606) $
(126,686) $
— $
2,097,730 $
Performance Stock Units
Weighted
Average
Grant Date
Fair Value
32.87
48.00
30.73
37.45
30.72
37.56
Shares
961,163 $
231,445 $
(613,734) $
(17,446) $
306,580 $
868,008 $
The weighted-average grant-date fair value of the Company's restricted stock units granted during the
years ended December 31, 2013 and 2012 was $36.70 and $31.96, respectively. The weighted average
grant date fair value of the Company's performance stock units granted during the years ended
December 31, 2013 and 2012 was $36.54 and $31.89, respectively. The total fair value of the shares
distributed during the years ended December 31, 2014, 2013 and 2012 in connection with the Company's
restricted stock units and performance stock units was $165.3 million, $205.5 million and $262.6 million,
respectively.
The number of vested performance stock units includes any applicable performance adjustment shares.
The adjustment due to performance reflects the incremental portion of the above-target payout at 200%
for PSU's awarded in 2011 that vested on the PSU Scheduled Vesting Date in 2014 and PSU's awarded
in February 2013 and 2012 that vested during 2014 (either in full or on a pro-rata basis) due to certain
types of termination of employment. There is no adjustment due to performance for performance stock
units awarded in February 2014 that vested during 2014 due to certain types of termination of
employment within the calendar year of grant since the payout of such awards is at 100% of target under
the award's terms and conditions.
Restricted Stock: Restricted shares of the Company's common stock may be awarded under the 2011
Plan and are subject to restrictions on transferability and other restrictions, if any, as the Compensation
Committee may impose. The Compensation Committee may also determine when and under what
circumstances the restrictions may lapse and whether the participant receives the rights of a stockholder,
including, without limitation, the right to vote and receive dividends. Unless the Compensation Committee
determines otherwise, restricted stock that is still subject to restrictions is forfeited upon termination of
employment. There have been no restricted shares granted since 2005.
A summary of the status of the Company's restricted stock awards as of December 31, 2014 and changes
during the period then ended is presented below:
Non-vested balance at January 1, 2014
Granted
Vested
Forfeited
Non-vested balance at December 31, 2014
Weighted
Average
Grant Date
Fair Value
46.14
—
—
—
46.14
Shares
7,200 $
— $
— $
— $
7,200 $
The total fair value of the Company's restricted stock distributed was $1.1 million during the year ended
December 31, 2013 and $0.6 million for the year ended December 31, 2012. There were no restricted
stock distributions during 2014.
85
As of December 31, 2014, there was $55.8 million of unrecognized compensation cost related to the
Company's restricted stock, restricted stock units and performance stock unit awards. The weighted-
average period over which that cost is expected to be recognized is approximately one year.
Marsh & McLennan Companies Stock Purchase Plans
In May 1999, the Company's stockholders approved an employee stock purchase plan (the “1999 Plan”)
to replace the 1994 Employee Stock Purchase Plan (the “1994 Plan”), which terminated on September
30, 1999 following its fifth annual offering. Under the current terms of the Plan, shares are purchased four
times during the plan year at a price that is 95% of the average market price on each quarterly purchase
date. Under the 1999 Plan, after including the available remaining unused shares in the 1994 Plan and
reducing the shares available by 10,000,000 consistent with the Company's Board of Directors' action in
March 2007, no more than 35,600,000 shares of the Company's common stock may be sold. Employees
purchased 608,453 shares during the year ended December 31, 2014 and at December 31, 2014,
2,779,195 shares were available for issuance under the 1999 Plan. Under the 1995 Company Stock
Purchase Plan for International Employees (the “International Plan”), after reflecting the additional
5,000,000 shares of common stock for issuance approved by the Company's Board of Directors in July
2002, and the addition of 4,000,000 shares due to a shareholder action in May 2007, no more than
12,000,000 shares of the Company's common stock may be sold. Employees purchased 93,490 shares
during the year ended December 31, 2014 and there were 2,893,986 shares available for issuance at
December 31, 2014 under the International Plan. The plans are considered non-compensatory.
10. Fair Value Measurements
Fair Value Hierarchy
The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis
into a three-level fair value hierarchy as defined by the accounting literature. The fair value hierarchy
gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and
lowest priority to unobservable inputs (Level 3). In some cases, the inputs used to measure fair value
might fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy,
for disclosure purposes, is determined based on the lowest level input that is significant to the fair value
measurement. Assets and liabilities recorded in the consolidated balance sheets at fair value are
categorized based on the inputs in the valuation techniques as follows:
Level 1.
Assets and liabilities whose values are based on unadjusted quoted prices for identical
assets or liabilities in an active market (examples include active exchange-traded equity
securities and money market mutual funds).
Assets and liabilities utilizing Level 1 inputs include exchange-traded equity securities and mutual funds.
Level 2.
Assets and liabilities whose values are based on the following:
a)
b)
c)
d)
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in non-active markets
(examples include corporate and municipal bonds, which trade infrequently);
Pricing models whose inputs are observable for substantially the full term of the
asset or liability (examples include most over-the-counter derivatives, including
interest rate and currency swaps); and
Pricing models whose inputs are derived principally from or corroborated by
observable market data through correlation or other means for substantially the
full asset or liability (for example, certain mortgage loans).
Assets and liabilities utilizing Level 2 inputs include corporate and municipal bonds, senior notes and
interest rate swaps.
86
Level 3.
Assets and liabilities whose values are based on prices, or valuation techniques that
require inputs that are both unobservable and significant to the overall fair value
measurement. These inputs reflect management’s own assumptions about the
assumptions a market participant would use in pricing the asset or liability (examples
include private equity investments, certain commercial mortgage whole loans, and long-
dated or complex derivatives including certain foreign exchange options and long-dated
options on gas and power).
Liabilities utilizing Level 3 inputs include liabilities for contingent purchase consideration.
Valuation Techniques
Equity Securities and Mutual Funds - Level 1
Investments for which market quotations are readily available are valued at the sale price on their
principal exchange, or official closing bid price for certain markets.
Interest Rate Swap Derivative - Level 2
The fair value of interest rate swap derivatives is based on the present value of future cash flows at each
valuation date resulting from utilization of the swaps, using a constant discount rate of 1.6% compared to
discount rates based on projected future yield curves. The Company settled its interest rate swap
positions in July 2014.
Senior Notes due July 2014 - Level 2
In the first quarter of 2011, the Company entered into two interest rate swaps to convert interest on a
portion of its Senior Notes from a fixed rate to a floating rate. The swaps are designated as fair value
hedging instruments. The change in the fair value of the swaps is recorded on the balance sheet. The
carrying value of the debt related to these swaps is adjusted by an equal amount. The $250 million of
Senior Notes that were tied to the interest rate swaps discussed above matured in July 2014.
Contingent Purchase Consideration Liability - Level 3
Purchase consideration for some acquisitions made by the Company includes contingent consideration
arrangements. Contingent consideration arrangements are primarily based on meeting EBITDA and
revenue targets over periods from two to four years. The fair value of contingent consideration is
estimated as the present value of future cash flows resulting from the projected revenue and earnings of
the acquired entities.
87
The following fair value hierarchy table presents information about the Company’s assets and liabilities
measured at fair value on a recurring basis as of December 31, 2014 and 2013:
(In millions of dollars)
Identical Assets
(Level 1)
Observable Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Total
12/31/14
12/31/13
12/31/14
12/31/13
12/31/14
12/31/13
12/31/14
12/31/13
Assets:
Financial instruments owned:
Mutual funds(a)
Money market funds(b)
Interest rate swap derivatives(c)
Total assets measured at fair
value
Fiduciary Assets:
Total fiduciary assets measured at
fair value
Liabilities:
Contingent purchase
consideration liability(d)
Senior Notes due 2014(e)
Total liabilities measured at fair
value
$
$
$
—
3
3
—
$
150
107
—
$
154
$
— $
— $
— $
— $
45
—
—
—
—
—
—
—
150
107
—
$
154
45
3
$
257
$
199
$
— $
$
— $
— $
257
$
202
57
$
— $
— $
— $
— $
— $
57
$
— $
— $
— $
— $
207
$
104
$
207
$
—
—
—
253
—
—
—
—
—
104
253
Money market funds
57
—
—
—
—
57
— $
— $
— $
253
$
207
$
104
$
207
$
357
(a) Included in other assets in the consolidated balance sheets.
(b) Included in cash and cash equivalents in the consolidated balance sheets.
(c) Included in other receivables in the consolidated balance sheets.
(d) Included in accounts payable and accrued liabilities and other liabilities in the consolidated balance sheets.
(e) Included in long-term debt in the consolidated balance sheets.
During the year ended December 31, 2014, there were no assets or liabilities that transferred between
any of the levels.
The table below sets forth a summary of the changes in fair value of the Company’s Level 3 liabilities for
the years ended December 31, 2014 and December 31, 2013 that represent contingent purchase
consideration related to acquisitions:
(In millions of dollars)
Balance at January 1,
Additions
Payments
Revaluation Impact
Balance at December 31,
2014
2013
$
$
104
114
(42)
31
$
207
$
63
26
(17)
32
104
The fair value of the contingent purchase consideration liability is based on projections of revenue and
earnings for the acquired entities that are reassessed on a quarterly basis. As set forth in the table above,
based on the Company's ongoing assessment of the fair value of contingent consideration, the Company
recorded a net increase in the estimated fair value of such liabilities for prior period acquisitions of $31
million for the year ended December 31, 2014. A 5% increase in the above mentioned projections would
increase the liability by approximately $22 million. A 5% decrease in the above mentioned projections
would decrease the liability by approximately $26 million.
88
Equity Method Investments
The Company holds investments in certain private companies, public companies and certain private
equity investments that are accounted for using the equity method of accounting. The carrying value of
these investments amounted to $388 million and $89 million at December 31, 2014 and 2013,
respectively. The Company's investments in private equity funds were $61 million and $38 million at
December 31, 2014 and December 31, 2013, respectively. The carrying values of these private equity
investments approximates fair value. The underlying private equity funds follow investment company
accounting, where investments within the fund are carried at fair value. The Company records in
earnings, investment gains/losses for its proportionate share of the change in fair value of the funds.
These investments would be classified as Level 3 in the fair value hierarchy and are included in Other
assets in the consolidated balance sheets.
During 2014, the Company purchased 34% of Alexander Forbes common stock. As of December 31,
2014, the carrying value of the Company’s investment in Alexander Forbes was approximately $282
million. As of December 31, 2014, the market value of the approximately 443 million shares owned by the
Company, based on the December 31, 2014 closing share price of 9.5 South African Rand per share, was
approximately $362 million. The Company’s investment in Alexander Forbes and its other equity
investments in private companies are accounted for using the equity method of accounting and included
in revenue in the consolidated income statements and in other assets in the consolidated balance sheets.
The Company records its share of income or loss on its equity method investments on a one quarter lag
basis since the information is not readily available in time for the Company's Form 10-Q and Form 10-K
filings.
The summarized financial information presented below reflects the aggregated financial information of all
significant equity method investees as of and for the twelve months ended September 30 of each year (or
portion of those twelve months the company owned its investment), consistent with the Company’s
recognition of the results of its equity method investments on a one quarter lag. The investment income
information presented below reflects the net realized and unrealized gains/losses, net of expenses,
related to the Company's investments in several private equity funds. Certain of the Company’s equity
method investments, including Alexander Forbes, have unclassified balance sheets. Therefore, the asset
and liability information presented below are not split between current and non-current.
Below is a summary of the financial information for the Company's significant equity method investees:
For the Twelve Months Ended September 30,
(In millions of dollars)
Revenue
Net investment income
Net income
As of September 30,
(In millions of dollars)
Total assets
Total liabilities
Non controlling interests
2014
239
161
216
$
$
$
2013
148
88
135
$
$
$
2014
25,497
24,209
14
$
$
$
2012
144
(19)
36
2013
741
136
3
$
$
$
$
$
$
The information above includes only two months of income statement activity for Alexander Forbes
through September 30, 2014, since the Company purchased its first tranche in July 2014.
89
11. Long-term Commitments
The Company leases office facilities, equipment and automobiles under non-cancelable operating leases.
These leases expire on varying dates, in some instances contain renewal and expansion options, do not
restrict the payment of dividends or the incurrence of debt or additional lease obligations, and contain no
significant purchase options. In addition to the base rental costs, occupancy lease agreements generally
provide for rent escalations resulting from increased assessments for real estate taxes and other charges.
Approximately 98% of the Company’s lease obligations are for the use of office space.
The consolidated statements of income include net rental costs of $393 million, $403 million and $416
million for 2014, 2013 and 2012, respectively, after deducting rentals from subleases ($12 million in 2014,
$13 million in 2013 and $10 million in 2012). These net rental costs exclude rental costs and sublease
income for previously accrued restructuring charges related to vacated space.
At December 31, 2014, the aggregate future minimum rental commitments under all non-cancelable
operating lease agreements are as follows:
For the Years Ended December 31,
(In millions of dollars)
2015
2016
2017
2018
2019
Subsequent years
Gross
Rental
Commitments
$
$
$
$
$
$
365 $
334 $
293 $
258 $
212 $
1,010 $
Rentals
from
Subleases
Net
Rental
Commitments
317
286
248
216
177
974
48 $
48 $
45 $
42 $
35 $
36 $
The Company has entered into agreements, primarily with various service companies, to outsource
certain information systems activities and responsibilities and processing activities. Under these
agreements, the Company is required to pay minimum annual service charges. Additional fees may be
payable depending upon the volume of transactions processed, with all future payments subject to
increases for inflation. At December 31, 2014, the aggregate fixed future minimum commitments under
these agreements are as follows:
For the Years Ended December 31,
(In millions of dollars)
2015
2016
2017
Subsequent years
Future
Minimum
Commitments
195
$
113
64
69
441
$
90
12. Debt
The Company’s outstanding debt is as follows:
December 31,
(In millions of dollars)
Short-term:
Current portion of long-term debt
Long-term:
Senior notes – 5.875% due 2033
Senior notes – 5.375% due 2014
Senior notes – 5.75% due 2015
Senior notes – 2.30% due 2017
Senior notes – 9.25% due 2019
Senior notes – 4.80% due 2021
Senior notes – 2.55% due 2018
Senior notes – 4.05% due 2023
Senior notes – 3.50% due 2024
Senior notes – 2.35% due 2019
Senior notes – 3.50% due 2025
Mortgage – 5.70% due 2035
Term Loan Facility – due 2016
Other
Less current portion
2014
2013
$
11 $
334
297
—
—
249
—
497
249
248
595
300
498
403
50
1
3,387
11
3,376 $
297
323
230
249
399
497
248
247
—
—
—
413
50
2
2,955
334
2,621
$
The senior notes in the table above are publically registered by the Company with no guarantees
attached.
In September 2014, the Company issued $300 million of 2.35% five-year senior notes and $500 million of
3.50% 10.5-year senior notes. In October 2014, a significant portion of the net proceeds of this offering
were used to redeem $630 million of debt, including $230 million of 5.75% senior notes due in September
2015 and $400 million of 9.25% senior notes due in 2019. Total cash outflow related to this transaction
was approximately $765 million, including a $137 million cost for early redemption, which is reflected as a
charge in the consolidated statements of income in the fourth quarter of 2014.
In May 2014, the Company issued $600 million of 3.50% ten-year senior notes. The net proceeds of this
offering were used for general corporate purposes, which included the repayment of $320 million of the
existing 5.375% senior notes, which matured on July 15, 2014.
In September 2013, the Company issued $250 million of 2.55% five-year senior notes and $250 million of
4.05% ten-year senior notes. The net proceeds of this offering were used for general corporate purposes,
which included a partial redemption of $250 million of the outstanding principal amount of the existing
5.75% senior notes due 2015. The redemption settled in October 2013 with a total cash outflow of
approximately $275 million, including a $24 million cost for early redemption.
In February 2013, the Company repaid its 4.850% $250 million senior notes.
On March 27, 2014, the Company and certain of its foreign subsidiaries amended its $1.0 billion facility,
as discussed below, into a $1.2 billion multi-currency five-year unsecured revolving credit facility. The
interest rate on this facility is based on LIBOR plus a fixed margin which varies with the Company's credit
ratings. This facility expires in March 2019 and requires the Company to maintain certain coverage and
leverage ratios which are tested quarterly. There were no borrowings outstanding under this facility at
December 31, 2014.
91
The Company and certain of its foreign subsidiaries previously maintained a $1.0 billion multi-currency
five-year revolving credit facility. The facility was previously due to expire in October 2016 and was in
effect until March 2014. There were no borrowings outstanding under this facility at the time it was
amended.
In December 2012, the Company closed on a $50 million, three-year term loan facility. The interest rate
on this facility at December 31, 2014 was 1.17%, which is based on LIBOR plus a fixed margin which
varies with the Company's credit ratings. The facility requires the Company to maintain coverage ratios
and leverage ratios consistent with the revolving credit facility discussed above. The Company had $50
million of borrowings under this facility at December 31, 2014.
Additional credit facilities, guarantees and letters of credit are maintained with various banks, primarily
related to operations located outside the United States, aggregating $260 million at December 31, 2014
and $282 million at December 31, 2013. There was $0.6 million outstanding borrowings under these
facilities at December 31, 2014 and $1 million outstanding borrowings under these facilities at
December 31, 2013.
Scheduled repayments of long-term debt in 2015 and in the four succeeding years are $10 million, $61
million, $262 million, $262 million and $313 million, respectively.
Fair value of Short-term and Long-term Debt
The estimated fair value of the Company’s short-term and long-term debt is provided below. Certain
estimates and judgments were required to develop the fair value amounts. The fair value amounts shown
below are not necessarily indicative of the amounts that the Company would realize upon disposition, nor
do they indicate the Company’s intent or need to dispose of the financial instrument.
(In millions of dollars)
Short-term debt
Long-term debt
December 31, 2014
Carrying
Amount
Fair
Value
December 31, 2013
Carrying
Amount
Fair
Value
$
$
11 $
3,376 $
11
3,493
$
$
334 $
334
2,621 $
2,819
The fair value of the Company’s short-term debt consists primarily of term debt maturing within the next
year and its fair value approximates its carrying value. The estimated fair value of a primary portion of the
Company's long-term debt is based on discounted future cash flows using current interest rates available
for debt with similar terms and remaining maturities. Short- and long-term debt would be classified as
Level 2 in the fair value hierarchy.
92
13. Integration and Restructuring Costs
In 2014, the Company implemented restructuring actions which resulted in costs totaling $12 million.
Restructuring costs consist primarily of severance and benefits, costs for future rent and other real estate
costs. These costs were incurred as follows: Risk and Insurance Services—$5 million; Consulting—$1
million; and Corporate—$6 million.
Details of the restructuring liability activity from January 1, 2013 through December 31, 2014, including
actions taken prior to 2014 are as follows:
(In millions
of dollars)
Balance at
1/1/13
Expense
Incurred
Cash
Paid Other
Balance at
12/31/13
Expense
Incurred
Cash
Paid Other
Balance at
12/31/14
Severance $
36 $
9 $ (33) $ (1) $
11 $
4 $
(8) $ — $
7
Future rent
under non-
cancelable
leases and
other costs
134
13
(32)
(2)
113
8
(35)
(1)
Total
$
170 $
22 $ (65) $ (3) $
124 $
12 $ (43) $ (1) $
85
92
As of January 1, 2012, the liability balance related to restructuring activity was $181 million. In 2012, the
Company accrued $78 million and had cash payments of $88 million related to restructuring activities that
resulted in the liability balance at January 1, 2013 reported above.
The expenses associated with the above initiatives are included in compensation and benefits and other
operating expenses in the consolidated statements of income. The liabilities associated with these
initiatives are classified on the consolidated balance sheets as accounts payable and accrued liabilities,
other liabilities, or accrued compensation and employee benefits, depending on the nature of the items.
14. Common Stock
During 2014, the Company repurchased 15.5 million shares of its common stock for total consideration of
$800 million. In May 2014, the Board of Directors of the Company authorized share repurchases of up to
$2 billion of the Company's common stock. The Company remains authorized to purchase additional
shares of its common stock up to a value of $1.3 billion. There is no time limit on the authorization. During
2013, the Company purchased 13.2 million shares of its common stock for total consideration of $550
million.
15. Claims, Lawsuits and Other Contingencies
Errors and Omissions Claims
The Company and its subsidiaries are subject to a significant number of claims, lawsuits and proceedings
in the ordinary course of business. Such claims and lawsuits consist principally of alleged errors and
omissions in connection with the performance of professional services, including the placement of
insurance, the provision of actuarial services for corporate and public sector clients, the provision of
investment advice and investment management services to pension plans, the provision of advice relating
to pension buy-out transactions and the provision of consulting services relating to the drafting and
interpretation of trust deeds and other documentation governing pension plans. Errors and omissions
claims may seek damages, including punitive and treble damages, in amounts that could, if awarded, be
significant. In establishing liabilities for errors and omissions claims in accordance with FASB ASC
Subtopic No. 450-20 (Contingencies-Loss Contingencies), the Company utilizes case level reviews by
inside and outside counsel, an internal actuarial analysis and other analysis to estimate potential losses.
A liability is established when a loss is both probable and reasonably estimable. The liability is reviewed
quarterly and adjusted as developments warrant. In many cases, the Company has not recorded a
liability, other than for legal fees to defend the claim, because we are unable, at the present time, to make
a determination that a loss is both probable and reasonably estimable.
93
To the extent that expected losses exceed our deductible in any policy year, the Company also records an
asset for the amount that we expect to recover under any available third-party insurance programs. The
Company has varying levels of third-party insurance coverage, with policy limits and coverage terms
varying significantly by policy year.
Governmental Inquiries and Related Claims
Our activities are regulated under the laws of the United States and its various states, the European
Union and its member states, and the other jurisdictions in which the Company operates. In the ordinary
course of business the Company is also subject to subpoenas, investigations, lawsuits and/or other
regulatory actions undertaken by governmental authorities.
Other Contingencies-Guarantees
In connection with its acquisition of U.K.-based Sedgwick Group in 1998, the Company acquired several
insurance underwriting businesses that were already in run-off, including River Thames Insurance
Company Limited (“River Thames”), which the Company sold in 2001. Sedgwick guaranteed payment of
claims on certain policies underwritten through the Institute of London Underwriters (the “ILU”) by River
Thames. The policies covered by this guarantee are reinsured up to £40 million by a related party of River
Thames. Payment of claims under the reinsurance agreement is collateralized by segregated assets held
in a trust. As of December 31, 2014, the reinsurance coverage exceeded the best estimate of the
projected liability of the policies covered by the guarantee. To the extent River Thames or the reinsurer is
unable to meet its obligations under those policies, a claimant may seek to recover from us under the
guarantee.
From 1980 to 1983, the Company owned indirectly the English & American Insurance Company (“E&A”),
which was a member of the ILU. The ILU required the Company to guarantee a portion of E&A's
obligations. After E&A became insolvent in 1993, the ILU agreed to discharge the guarantee in exchange
for the Company's agreement to post an evergreen letter of credit that is available to pay claims by
policyholders on certain E&A policies issued through the ILU and incepting between July 3, 1980 and
October 6, 1983. Certain claims have been paid under the letter of credit and we anticipate that additional
claimants may seek to recover against the letter of credit.
Kroll-related Matters
Under the terms of a stock purchase agreement with Altegrity, Inc. (“Altegrity”) related to Altegrity's
purchase of Kroll from the Company in August 2010, a copy of which is attached as an exhibit to the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 2010, the Company agreed to
provide a limited indemnity to Altegrity with respect to certain Kroll-related litigation and regulatory
matters.
The pending proceedings and other matters described in this Note 15 on Claims, Lawsuits and Other
Contingencies may expose the Company or its subsidiaries to liability for significant monetary damages
and other forms of relief. Where a loss is both probable and reasonably estimable, the Company
establishes liabilities in accordance with FASB ASC Subtopic No. 450-20 (Contingencies-Loss
Contingencies). Except as described above, the Company is not able at this time to provide a reasonable
estimate of the range of possible loss attributable to these matters or the impact they may have on the
Company's consolidated results of operations, financial position or cash flows. This is primarily because
these matters are still developing and involve complex issues subject to inherent uncertainty. Adverse
determinations in one or more of these matters could have a material impact on the Company's
consolidated results of operations, financial condition or cash flows in a future period.
94
16. Segment Information
The Company is organized based on the types of services provided. Under this organizational structure,
the Company’s segments are:
Risk and Insurance Services, comprising insurance services (Marsh) and reinsurance services
(Guy Carpenter); and
Consulting, comprising Mercer and Oliver Wyman Group
The accounting policies of the segments are the same as those used for the consolidated financial
statements described in Note 1. Segment performance is evaluated based on segment operating income,
which includes directly related expenses, and charges or credits related to integration and restructuring
but not the Company’s corporate-level expenses. Revenues are attributed to geographic areas on the
basis of where the services are performed.
Selected information about the Company’s segments and geographic areas of operation are as follows:
For the Year Ended December 31,
(In millions of dollars)
Revenue
Operating
Income
(Loss)
Total
Assets
Depreciation
and
Amortization
Capital
Expenditures
2014 –
Risk and Insurance Services
Consulting
Total Segments
Corporate / Eliminations
Total Consolidated
2013 –
Risk and Insurance Services
Consulting
Total Segments
Corporate / Eliminations
Total Consolidated
2012 –
Risk and Insurance Services
Consulting
Total Segments
Corporate / Eliminations
Total Consolidated
$ 6,931 (a) $
6,059 (b)
12,990
(39)
$ 12,951
$
$ 6,596 (a) $
5,701 (b)
12,297
(36)
$ 12,261
$
$ 6,350 (a) $
5,613 (b)
11,963
(39)
$ 11,924
$
1,509 $ 12,211
5,916
18,127
996
2,505
(204)
2,301 $ 17,840
(287) (c)
1,421 $ 11,365
5,178
16,543
845
2,266
(189)
2,077 $ 16,980
437 (c)
1,334 $ 9,832
5,203
15,035
692
2,026
(197)
1,829 $ 16,288
1,253 (c)
$
$
$
$
$
$
213
119
332
56
388
192
115
307
51
358
196
113
309
40
349
$
$
$
$
$
$
173
92
265
103
368
158
155
313
88
401
131
117
248
72
320
(a)
(b)
(c)
Includes inter-segment revenue of $4 million in 2014 and $5 million in both 2013 and 2012, interest income
on fiduciary funds of $24 million, $27 million and $39 million in 2014, 2013 and 2012, respectively, and
equity method income of $9 million, $8 million and $11 million in 2014, 2013 and 2012, respectively.
Includes inter-segment revenue of $35 million, $31 million and $34 million in 2014, 2013 and 2012,
respectively, interest income on fiduciary funds of $6 million in 2014, $5 million in 2013 and $4 million in 2012
and equity method income of $2 million in 2014, and $0 million in both 2013 and 2012.
Corporate assets primarily include insurance recoverables, pension related assets, the owned portion of the
Company headquarters building and intercompany eliminations.
95
Details of operating segment revenue are as follows:
For the Years Ended December 31,
(In millions of dollars)
Risk and Insurance Services
Marsh
Guy Carpenter
Total Risk and Insurance Services
Consulting
Mercer
Oliver Wyman Group
Total Consulting
Total Segments
Corporate / Eliminations
Total
Information by geographic area is as follows:
For the Years Ended December 31,
(In millions of dollars)
Revenue
United States
United Kingdom
Continental Europe
Asia Pacific
Other
Corporate/Eliminations
For the Years Ended December 31,
(In millions of dollars)
Fixed Assets, Net
United States
United Kingdom
Continental Europe
Asia Pacific
Other
2014
2013
2012
$
5,774
1,157
6,931
$
5,461
1,135
6,596
$
5,265
1,085
6,350
4,350
1,709
6,059
12,990
(39)
$ 12,951
4,241
1,460
5,701
12,297
(36)
$ 12,261
4,147
1,466
5,613
11,963
(39)
$ 11,924
2014
2013
2012
$
5,865
2,111
2,077
1,420
1,517
12,990
(39)
$ 12,951
$
5,485
1,979
1,943
1,396
1,494
12,297
(36)
$ 12,261
$
5,300
1,960
1,879
1,346
1,478
11,963
(39)
$ 11,924
2014
2013
2012
$
$
483
120
60
62
84
809
$
$
494
121
64
72
77
828
$
$
494
121
63
62
69
809
96
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Marsh & McLennan
Companies, Inc. and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the
related consolidated statements of income, comprehensive income, cash flows and equity for
each of the three years in the period ended December 31, 2014. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of Marsh & McLennan Companies, Inc. and subsidiaries as of December 31,
2014 and 2013, and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2014, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial reporting as of
December 31, 2014, based on the criteria established in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated February 26, 2015 expressed an unqualified opinion on the Company’s internal
control over financial reporting.
/s/ Deloitte & Touche LLP
New York, New York
February 26, 2015
97
Marsh & McLennan Companies, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
(In millions, except per share figures)
2014:
Revenue
Operating income
Income from continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Basic Per Share Data:
Continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Diluted Per Share Data:
Continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Dividends Paid Per Share
2013:
Revenue
Operating income
Income from continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Basic Per Share Data:
Continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Diluted Per Share Data:
Continuing operations
Discontinued operations, net of tax
Net income attributable to the Company
Dividends Paid Per Share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,264 $
3,300 $
3,141 $
3,246
673 $
457 $
(1) $
443 $
0.81 $
— $
0.81 $
0.80 $
— $
0.80 $
0.25 $
647 $
440 $
(2) $
431 $
0.79 $
(0.01) $
0.78 $
0.78 $
(0.01) $
0.77 $
0.25 $
445 $
305 $
(1) $
297 $
0.55 $
— $
0.55 $
0.54 $
— $
0.54 $
0.28 $
536
269
30
294
0.49
0.05
0.54
0.48
0.06
0.54
0.28
3,126 $
3,088 $
2,932 $
3,115
607 $
412 $
12 $
413 $
0.73 $
0.02 $
0.75 $
0.72 $
0.02 $
0.74 $
0.23 $
577 $
400 $
(5) $
388 $
0.71 $
— $
0.71 $
0.70 $
(0.01) $
0.69 $
0.23 $
404 $
260 $
(1) $
253 $
0.46 $
— $
0.46 $
0.45 $
— $
0.45 $
0.25 $
489
307
—
303
0.55
—
0.55
0.54
—
0.54
0.25
As of February 20th, 2015, there were 6,197 stockholders of record.
98
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures. Based on their evaluation, as of the end of the period covered
by this annual report on Form 10-K, the Company’s chief executive officer and chief financial officer have
concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934) are effective.
Internal Control over Financial Reporting.
(a) Management’s Annual Report on Internal Control Over Financial Reporting
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Marsh & McLennan Companies, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures relating to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; the recording of all necessary transactions to permit the
preparation of the Company’s consolidated financial statements in accordance with generally accepted
accounting principles; the proper authorization of receipts and expenditures in accordance with
authorizations of the Company’s management and directors; and the prevention or timely detection of the
unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s
consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management evaluated the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2014 under the supervision and with the participation of the Company’s principal executive
and principal financial officers. In making this evaluation, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—
Integrated Framework issued in 2013. Based on its evaluation, management determined that the
Company maintained effective internal control over financial reporting as of December 31, 2014.
Deloitte & Touche LLP, the Independent Registered Public Accounting Firm that audited and reported on
the Company’s consolidated financial statements included in this annual report on Form 10-K, also issued
an audit report on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2014.
99
(b) Audit Report of the Registered Public Accounting Firm.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.
New York, New York
We have audited the internal control over financial reporting of Marsh & McLennan Companies, Inc. and
subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. The Company’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of,
the company's principal executive and principal financial officers, or persons performing similar functions,
and effected by the company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may
not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of
the internal control over financial reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on the criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the year ended December 31,
2014 of the Company and our report dated February 26, 2015 expressed an unqualified opinion on those
financial statements.
/s/ Deloitte & Touche LLP
New York, New York
February 26, 2015
100
(c) Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection
with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Securities Exchange Act of 1934
that occurred during the quarter ended December 31, 2014 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
101
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information as to the directors and nominees for the board of directors of the Company is incorporated
herein by reference to the material set forth under the heading “Item 1: Election of Directors” in the 2015
Proxy Statement.
The executive officers of the Company are Peter J. Beshar, J. Michael Bischoff, E. Scott Gilbert, Daniel S.
Glaser, Laurie Ledford, Scott McDonald, Alexander S. Moczarski, Julio A. Portalatin and Peter Zaffino.
Information with respect to these individuals is provided in Part I, Item 1 above under the heading
“Executive Officers of the Company”.
The information set forth in the 2015 Proxy Statement in the sections “Corporate Governance—Codes of
Conduct”, “Board of Directors and Committees—Committees—Audit Committee”, “Additional Information
—Transactions with Management and Others" and "Additional Information—Section 16(a) Beneficial
Ownership Reporting Compliance” is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth in the sections “Board of Directors and Committees—Director Compensation”
and “Executive Compensation—Compensation of Executive Officers” in the 2015 Proxy Statement is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The information set forth in the sections “Stock Ownership of Directors, Management and Certain
Beneficial Owners” and “Additional Information—Equity Compensation Plan Information” in the 2015
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information set forth in the sections “Corporate Governance—Director Independence”, “Corporate
Governance—Review of Related-Person Transactions” and “Additional Information—Transactions with
Management and Others” in the 2015 Proxy Statement is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information set forth under the heading “Item 3: Ratification of Selection of Independent Registered
Public Accounting Firm—Fees of Independent Registered Public Accounting Firm” in the 2015 Proxy
Statement is incorporated herein by reference.
102
PART IV
Item 15. Exhibits and Financial Statement Schedules. †
The following documents are filed as a part of this report:
(1)
Consolidated Financial Statements:
Consolidated Statements of Income for each of the three years in the period ended
December 31, 2014
Consolidated Statements of Comprehensive Income for each of the three years in the period
ended December 31, 2014
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2014
Consolidated Statements of Stockholders’ Equity for each of the three years in the period
ended December 31, 2014
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Other:
Selected Quarterly Financial Data and Supplemental Information (Unaudited) for fiscal years
2014 and 2013
Five-Year Statistical Summary of Operations
(2)
All required Financial Statement Schedules are included in the Consolidated Financial
Statements or the Notes to Consolidated Financial Statements.
(3)
The following exhibits are filed as a part of this report:
(2.1)
Stock Purchase Agreement, dated as of June 6, 2010, by and between Marsh &
McLennan Companies, Inc. and Altegrity, Inc. (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)
†As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has not filed with this Form 10-K
certain instruments defining the rights of holders of long-term debt of the Company and its
subsidiaries because the total amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of any such agreement to the Commission upon
request.
103
(3.1)
Restated Certificate of Incorporation of Marsh & McLennan Companies, Inc.
(incorporated by reference to the Company’s Current Report on Form 8-K dated
July 17, 2008)
(3.2)
Amended and Restated By-Laws of Marsh & McLennan Companies, Inc. (incorporated
by reference to the Company’s Current Report on Form 8-K dated September 17, 2009)
(4.1)
Indenture dated as of June 14, 1999 between Marsh & McLennan Companies, Inc. and
State Street Bank and Trust Company, as trustee (incorporated by reference to the
Company’s Registration Statement on Form S-3, Registration No. 333-108566)
(4.2)
Third Supplemental Indenture dated as of July 30, 2003 between Marsh & McLennan
Companies, Inc. and U.S. Bank National Association (as successor to State Street Bank
and Trust Company), as trustee (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2003)
(4.3)
Indenture dated as of March 19, 2002 between Marsh & McLennan Companies, Inc. and
State Street Bank and Trust Company, as trustee (incorporated by reference to the
Company’s Registration Statement on Form S-4, Registration No. 333-87510)
(4.4)
Indenture, dated as of July 15, 2011, between Marsh & McLennan Companies, Inc. and
The Bank of New York Mellon, as trustee (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)
(4.5)
First Supplemental Indenture, dated as of July 15, 2011, between Marsh & McLennan
Companies, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference
to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011)
(4.6)
Form of Second Supplemental Indenture between Marsh & McLennan Companies, Inc.
and The Bank of New York Mellon, as trustee (incorporated by reference to the
Company’s Current Report on Form 8-K dated March 7, 2012)
(4.7)
Form of Third Supplemental Indenture between Marsh & McLennan Companies, Inc. and
The Bank of New York Mellon, as trustee (incorporated by reference to the Company’s
Current Report on Form 8-K dated September 24, 2013)
(4.8)
Form of Fourth Supplemental Indenture between Marsh & McLennan Companies, Inc.
and The Bank of New York Mellon, as trustee (incorporated by reference to the
Company’s Current Report on Form 8-K dated May 27, 2014)
(4.9)
Form of Fifth Supplemental Indenture between Marsh & McLennan Companies, Inc. and
The Bank of New York Mellon, as trustee (incorporated by reference to the Company’s
Current Report on Form 8-K dated September 10, 2014)
104
(10.1)
*Marsh & McLennan Companies, Inc. U.S. Employee 1996 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996)
(10.2)
*Marsh & McLennan Companies, Inc. U.S. Employee 1997 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997)
(10.3)
*Marsh & McLennan Companies, Inc. U.S. Employee 1998 Cash Bonus Award Voluntary
Deferral Plan (incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998)
(10.4)
*Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive and Stock Award
Plan (incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 1999)
(10.5)
*Amendments to Marsh & McLennan Companies, Inc. 2000 Senior Executive Incentive
and Stock Award Plan and the Marsh & McLennan Companies, Inc. 2000 Employee
Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2005)
(10.6)
*Form of Awards under the Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004)
(10.7)
*Additional Forms of Awards under the Marsh & McLennan Companies, Inc. 2000 Senior
Executive Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005)
(10.8)
*2005 Award of Nonqualified Stock Options under the Marsh & McLennan Companies,
Inc. 2000 Senior Executive Incentive and Stock Award Plan (incorporated by reference to
the Company’s Annual Report on Form 10-K for the year ended December 31, 2012)
(10.9)
*Marsh & McLennan Companies, Inc. 2000 Employee Incentive and Stock Award Plan
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2001)
(10.10)
*Form of Awards under the Marsh & McLennan Companies, Inc. 2000 Employee
Incentive and Stock Award Plan (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004)
(10.11)
*Additional Forms of Awards under the Marsh & McLennan Companies, Inc. 2000
Employee Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2005)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
105
(10.12)
*2005 Award of Nonqualified Stock Options under the Marsh & McLennan Companies,
Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by reference to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2012)
(10.13)
*Form of Long-term Incentive Award under the Marsh & McLennan Companies, Inc. 2000
Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2006)
(10.14)
*Form of 2007 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2007)
(10.15)
*Form of 2008 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008)
(10.16)
*Form of 2009 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2009)
(10.17)
*Form of 2010 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010)
(10.18)
*Form of 2011 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2000 Senior Executive Incentive and Stock Award Plan and the Marsh & McLennan
Companies, Inc. 2000 Employee Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2011)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
106
(10.19)
*Form of 2011 Long-term Incentive Award dated as of June 1, 2011 under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2011)
(10.20)
*Form of 2012 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2012)
(10.21)
*Form of 2013 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2013)
(10.22)
*Form of 2014 Long-term Incentive Award under the Marsh & McLennan Companies, Inc.
2011 Incentive and Stock Award Plan (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2014)
(10.23)
*Form of Deferred Stock Unit Award, dated as of February 24, 2012, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2012)
(10.24)
*Form of Deferred Stock Unit Award, dated as of March 1, 2013, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2013)
(10.25)
*Form of Deferred Stock Unit Award, dated as of March 1, 2014, under the Marsh &
McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated by
reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March
31, 2014)
(10.26)
*Marsh & McLennan Companies, Inc. 2011 Incentive and Stock Award Plan (incorporated
by reference to the Company’s Registration Statement on Form S-8 dated August 5,
2011, Registration No. 333-176084)
(10.27)
*Amendments to Certain Marsh & McLennan Companies Equity-Based Awards Due to
U.S. Tax Law Changes Affecting Equity-Based Awards granted under the Marsh &
McLennan Companies, Inc. 2000 Senior Executive Incentive and Stock Award Plan and
the Marsh & McLennan Companies, Inc. 2000 Employee Incentive and Stock Award
Plan, effective January 1, 2009 (incorporated by reference to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
107
(10.28)
*Section 409A Amendment Document, effective as of January 1, 2009 (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008)
(10.29)
*Section 409A Amendment Regarding Payments Conditioned Upon Employment-Related
Action to Any and All Plans or Arrangements Entered into by the Marsh & McLennan
Companies, Inc., or any of its Direct or Indirect Subsidiaries, that Provide for the Payment
of Section 409A Nonqualified Deferred Compensation, effective December 21, 2012
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2012)
(10.30)
*Marsh & McLennan Companies Supplemental Savings & Investment Plan (formerly the
Marsh & McLennan Companies Stock Investment Supplemental Plan) Restatement,
effective January 1, 2012 (incorporated by reference to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2012)
(10.31)
*Marsh & McLennan Companies, Inc. Special Severance Pay Plan (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 1996)
(10.32)
*Marsh & McLennan Companies Benefit Equalization Plan and Marsh & McLennan
Companies Supplemental Retirement Plan as Restated, effective January 1, 2012
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2012)
(10.33)
*Marsh & McLennan Companies, Inc. Senior Executive Severance Pay Plan
(incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the
Quarter ended March 31, 2008)
(10.34)
*Amendment to the Marsh & McLennan Companies, Inc. Senior Executive Severance
Pay Plan, effective December 31, 2009 (incorporated by reference to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009)
(10.35)
*Marsh & McLennan Companies, Inc. Senior Management Incentive Compensation Plan
(incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 1994)
(10.36)
*Marsh & McLennan Companies, Inc. Directors' Stock Compensation Plan-May 31, 2009
Restatement (incorporated by reference to the Company’s Quarterly Report on Form 10-
Q for the quarter ended June 30, 2009)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
108
(10.37)
*Marsh & McLennan Companies International Retirement Plan As Amended and
Restated Effective January 1, 2009 (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2014)
(10.38)
*Description of compensation arrangements for independent directors of Marsh &
McLennan Companies, Inc. effective June 1, 2014 (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014)
(10.39)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan
Companies, Inc. and Daniel S. Glaser (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2013)
(10.40)
*Non-Competition and Non-Solicitation Agreement, effective as of September 18, 2013,
between Marsh & McLennan Companies, Inc. and Daniel S. Glaser (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2013)
(10.41)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan
Companies, Inc. and Daniel S. Glaser (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014)
(10.42)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan
Companies, Inc. and J. Michael Bischoff (incorporated by reference to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2013)
(10.43)
*Non-Competition and Non-Solicitation Agreement, effective as of November 21, 2013,
between Marsh & McLennan Companies, Inc. and J. Michael Bischoff (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December
31, 2013)
(10.44)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan
Companies, Inc. and J. Michael Bischoff (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014)
(10.45)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan
Companies, Inc. and Peter Zaffino (incorporated by reference to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2013)
(10.46)
*Non-Competition and Non-Solicitation Agreement, effective as of November 21, 2013,
between Marsh & McLennan Companies, Inc. and Peter Zaffino (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December
31, 2013)
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
109
(10.47)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan
Companies, Inc. and Peter Zaffino (incorporated by reference to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2014)
(10.48)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan
Companies, Inc. and Julio A. Portalatin (incorporated by reference to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2013)
(10.49)
*Non-Competition and Non-Solicitation Agreement, effective as of November 21, 2013,
between Marsh & McLennan Companies, Inc. and Julio A. Portalatin (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended December
31, 2013)
(10.50)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan
Companies, Inc. and Julio A. Portalatin (incorporated by reference to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2014)
(10.51)
*Letter Agreement, effective as of March 20, 2013, between Marsh & McLennan
Companies, Inc. and Alexander S. Moczarski (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014)
(10.52)
*Non-Competition and Non-Solicitation Agreement, effective as of November 21, 2013,
between Marsh & McLennan Companies, Inc. and Alexander S. Moczarski (incorporated
by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2014)
(10.53)
*Letter Agreement, effective as of May 14, 2014, between Marsh & McLennan
Companies, Inc. and Alexander S. Moczarski (incorporated by reference to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014)
(12.1)
Statement Re: Computation of Ratio of Earnings to Fixed Charges
(14.1)
Code of Ethics for Chief Executive and Senior Financial Officers (incorporated by
reference to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2002)
(21.1)
List of Subsidiaries of Marsh & McLennan Companies, Inc. (as of February 20, 2015)
(23.1)
Consent of Independent Registered Public Accounting Firm
(24.1)
Power of Attorney (included on signature page)
(31.1)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
(31.2)
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
(32.1)
Section 1350 Certifications
101.INS
XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
110
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
*Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 15(b) of Form 10-K.
111
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MARSH & McLENNAN COMPANIES, INC.
Dated: February 26, 2015
By
/S/ DANIEL S. GLASER
Daniel S. Glaser
President and Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints Carey S. Roberts and
Tiffany D. Wooley, and each of them singly, such person’s lawful attorneys-in-fact and agents, with full
power to them and each of them to sign for such person, in the capacity indicated below, any and all
amendments to this Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities indicated this 26th day of
February, 2015.
Name
Title
Date
/S/ DANIEL S. GLASER
Daniel S. Glaser
/S/ J. MICHAEL BISCHOFF
J. Michael Bischoff
/S/ ROBERT J. RAPPORT
Robert J. Rapport
/S/ OSCAR FANJUL
Oscar Fanjul
/S/ H. EDWARD HANWAY
H. Edward Hanway
/S/ LORD LANG OF MONKTON
Lord Lang of Monkton
/S/ ELAINE LA ROCHE
Elaine La Roche
/S/ STEVEN A. MILLS
Steven A. Mills
Director, President &
Chief Executive Officer
February 26, 2015
Chief Financial Officer
February 26, 2015
Senior Vice President &
Controller
(Chief Accounting Officer)
February 26, 2015
Director
Director
Director
Director
Director
February 26, 2015
February 26, 2015
February 26, 2015
February 26, 2015
February 26, 2015
Name
Title
Date
/S/ BRUCE P. NOLOP
Bruce P. Nolop
/S/ MARC D. OKEN
Marc D. Oken
/S/ MORTON O. SCHAPIRO
Morton O. Schapiro
/S/ ADELE SIMMONS
Adele Simmons
/S/ LLOYD YATES
Lloyd Yates
/S/ R. DAVID YOST
R. David Yost
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Director
February 26, 2015
Exhibit 31.1
I, Daniel S. Glaser, certify that:
CERTIFICATIONS
1. I have reviewed this Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 26, 2015
/s/ Daniel S. Glaser
Daniel S. Glaser
President and Chief Executive Officer
Exhibit 31.2
I, J. Michael Bischoff, certify that:
CERTIFICATIONS
1. I have reviewed this Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 26, 2015
/s/ J. Michael Bischoff
J. Michael Bischoff
Chief Financial Officer
Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer
The certification set forth below is being submitted in connection with the Annual Report on Form 10-K for the year
ended December 31, 2014 of Marsh & McLennan Companies, Inc. (the “Report”) for the purpose of complying with
Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Daniel S. Glaser, the President and Chief Executive Officer, and J. Michael Bischoff, the Chief Financial Officer, of
Marsh & McLennan Companies, Inc. each certifies that, to the best of his knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of Marsh & McLennan Companies, Inc.
Date: February 26, 2015
Date: February 26, 2015
/s/ Daniel S. Glaser
Daniel S. Glaser
President and Chief Executive Officer
/s/ J. Michael Bischoff
J. Michael Bischoff
Chief Financial Officer
Stock performance graph
The following graph compares the annual cumulative stockholder
return for the five-year period ended December 31, 2014 on:
Marsh & McLennan Companies common stock; a management-
constructed composite industry index; and the Standard & Poor’s
500 Stock Index. The graph assumes an investment of $100 on
December 31, 2009 in Marsh & McLennan Companies common
stock and each of the two indices, with dividends reinvested.
Returns on the composite industry index reflect allocation of the
total amount invested among the constituent stocks on a pro
rata basis according to each issuer’s start-of-the-year market
capitalization. The composite industry index consists of Aon plc,
Arthur J. Gallagher & Co., Towers Watson & Co., and Willis Group
Holdings plc.
Comparison of Cumulative Total Stockholder Return
($100 INVESTED 12/31/09 WITH DIVIDENDS REINVESTED)
300250200150100200920102011201220132014Marsh & McLennan Companies100128153171246298Composite Industry Index100124136147231245S&P 500100115117136180205 Shareholder information
ANNUAL MEETING
The 2015 Annual Meeting of Shareholders
will be held at 10:00 a.m., Thursday,
May 21, 2015, at the following location:
Directors Guild of America
110 West 57th Street
New York, NY 10019
INVESTOR INFORMATION
Shareholders of record inquiring about
reinvestment and payment of dividends,
consolidation of accounts, stock certificate
holdings, stock certificate transfers,
and address changes should contact:
Wells Fargo Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Telephone: 800 457 8968 or
651 450 4064 (Outside US/Canada)
Mailing Address:
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
Wells Fargo’s website:
www.shareowneronline.com
Shareholders who hold shares of Marsh
& McLennan Companies beneficially
through a broker, bank, or other
intermediary organization should contact
that organization for these services.
DIRECT PURCHASE PLAN
Shareholders of record and other interested
investors can purchase Marsh & McLennan
Companies common stock directly through
the Company’s transfer agent and the
Administrator for the Plan, Wells Fargo.
A brochure on the Plan is available on the
Wells Fargo website or by contacting
Wells Fargo directly:
Wells Fargo Shareowner Services
P.O. Box 64856
St. Paul, MN 55164-0874
Telephone: 800 457 8968 or
651 450 4064 (Outside US/Canada)
Wells Fargo’s website:
www.shareowneronline.com
FINANCIAL INFORMATION
Copies of Marsh & McLennan Companies
annual reports and Forms 10-K and
10-Q are available on the Company’s
website. These documents also may
be requested by contacting:
Marsh & McLennan Companies, Inc.
Investor Relations
1166 Avenue of the Americas
New York, NY 10036
Telephone: 212 345 5462
Website: www.mmc.com
STOCK LISTINGS
Marsh & McLennan Companies
common stock (ticker symbol: MMC)
is listed on the New York, Chicago,
and London Stock Exchanges.
PROCEDURES FOR RAISING
COMPLAINTS AND CONCERNS
REGARDING ACCOUNTING MATTERS
Marsh & McLennan Companies is committed
to complying with all applicable accounting
standards, internal accounting controls,
audit practices, and securities laws and
regulations (collectively, “Accounting
Matters”). To raise a complaint or concern
regarding Accounting Matters, you may
contact the Company by mail, telephone,
or online. You may review the Company’s
procedures for handling complaints and
concerns regarding Accounting Matters
at www.mmc.com.
By mail:
Marsh & McLennan Companies, Inc.
Audit Committee
c/o Carey Roberts, Corporate Secretary
1166 Avenue of the Americas
New York, NY 10036
By telephone or online:
Visit www.ethicscomplianceline.com
for dialing instructions or to raise a
concern online.
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Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
www.mmc.com