Marsh & McLennan Companies 2009 Annual Report MMC is a global professional services fi rm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of the world’s leading risk experts and specialty consultants, including Marsh, the insurance broker and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related fi nancial advice and services; Oliver Wyman, the management consultancy; and Kroll, the risk consulting fi rm. With approximately 52,000 employees worldwide and annual revenue exceeding $10 billion, MMC provides analysis, advice and transactional capabilities to clients in more than 100 countries. This annual report contains “forward-looking statements,” as defi ned 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. Letter from the President and CEO over the past two years, we have more than doubled adjusted operating income in this segment to nearly $1 billion, as well as boosted its adjusted operating margin to 18.6 percent in 2009 from 8.6 percent in 2007. * Our Risk and Insurance Services businesses, Marsh and Guy Carpenter, have turned a corner with respect to events of previous years. Marsh, in particular, has stabilized, and we are looking ahead for opportunities to grow To Our Shareholders: revenue and further enhance the standing of these two insurance market leaders. hen I wrote to you one Q Continued soft market condi- Wyear ago, the world was tions in the global property & In our Consulting segment, still grappling with one of the casualty insurance market- Mercer and Oliver Wyman were most severe economic downturns place, which affected Marsh signifi cantly impacted by the in modern times. and Guy Carpenter; and recessionary conditions of 2008 and 2009. As the economic downturn I am pleased to report that at Q Extremely low interest rates was experienced globally, the Marsh & McLennan Companies in 2009, which signifi cantly segment’s non-U.S. business lines we successfully navigated the reduced interest income, as were also affected. Given these company through the “Great well as the effects from foreign companies’ inherent sensitivity to Recession” of 2009. In 2010, we currency translation that fl uctuations in GDP and the ability began the year with a renewed lowered operating income, of clients to deploy discretionary sense of optimism about economic primarily in our Consulting spending, this performance was conditions and a growing confi - segment. dence in our vision to be one of not unexpected. As we noted last year, we moved to implement the world’s preeminent profes- Despite these challenges, we cost-savings initiatives to offset sional services companies in risk, have excelled in achieving a major the effects of reduced demand as strategy, and human capital. objective I set upon joining MMC the severity of the fi nancial crisis in January 2008: to effect a turn- became apparent. First, let’s look briefl y at 2009. around in our Risk and Insurance MMC turned in a solid year Services segment, particularly That said, both companies saw despite strong economic and in our Marsh franchise. fi nancial headwinds, including: signs of improvement in the latter half of 2009. As the economy In 2009, adjusted operating continues to recover, we expect Q The global recession, which income in our Risk and Insurance results for Mercer and Oliver affected all of our operating Services segment grew by Wyman to further improve with it. segments, most notably our 35 percent over the previous year, Consulting segment; while the adjusted operating margin rose by more than 500 basis points over 2008. Indeed, * For a reconciliation of non-GAAP results to GAAP results, please refer to MMC’s Form 8-K, dated February 10, 2010, available on the MMC website at www.mmc.com. While 2009 was a diffi cult year for many companies, it was a successful one for MMC. Despite signifi cant economic hurdles, we stayed on track with the blueprint for success that was drawn up just two years ago. We have instituted real change in Risk and Insurance Services; managed the Consulting segment through the worst of the recession; and rationalized Kroll. We also made good progress in In summary, while 2009 was a Yet, we aspire to even greater strengthening Kroll, reestablishing diffi cult year for many companies, heights: to be recognized by our higher levels of profi tability it was a successful one for MMC. shareholders, clients, and em- over the course of 2009. Kroll’s Despite signifi cant economic ployees as one of the world’s elite profi tability in the second half of hurdles, we stayed on track with business enterprises. Our goal is 2009 refl ected management’s the blueprint for success that was to consistently rank among the aggressive actions to strengthen drawn up just two years ago. We very best global companies in and refocus the company and have instituted real change in Risk terms of the value we create, the reduce expenses. and Insurance Services; managed corporate culture we cultivate, the Consulting segment through and the ideas and solutions we Finally, we resolved two legacy the worst of the recession; and devise and deliver. matters, which allowed us to rationalized Kroll. Our new senior close the chapter on the events of management team, many of To help us achieve this, we have 2004. First, at the end of 2009, we whom joined us in 2008 and 2009, established four pillars upon announced the settlement of the is robust and working well together. which we will seek to build our securities and ERISA class action As a team, we feel very good long-term vision. They are: lawsuits fi led against MMC. about the accomplishments Second, in February 2010, we we’ve made over the past year, Consistent earnings growth. entered into an Amended and including the ability to sustain We must demonstrate consistent Restated Agreement with the earnings momentum during the and sustainable growth in earnings Attorney General of the State of worst economic crisis since the per share from all of our Operating New York and the Superintendent Great Depression. Companies, supplemented by of Insurance of the State of New revenue generation from select York, which replaced the settle- Focus on the Future opportunities that span our ment agreement entered into in As we worked through a diffi cult businesses. January 2005. This new agreement 2009, we also gave considerable has reestablished a level playing thought to our future. For Marsh and Guy Carpenter, we fi eld for Marsh, allowing us to will continue to pursue growth, compete on the same terms as Today, MMC is a leading global both organically and through every other intermediary in the professional services fi rm in risk, acquisitions. In hard insurance insurance industry. strategy, and human capital, with pricing cycles, when prices are each of our companies a clear leader in its area of expertise. For the past two years, our focus has been to stabilize the company and improve fi nancial performance, while effectively managing our overall business through the downturn. Having been successful at both, we return to the growth objective in 2010, specifi cally the achievement of signifi cant, profi table growth across all of our Operating Companies. rising, and in periods of positive capital usage will continue to We will use these pillars as prin- economic growth, organic growth be one of our company’s key ciples for growing our company. will be more robust. In softer operating principles. We will Our investments, including both cycles, in terms of both pricing remain focused on professional for organic growth and acquisi- and the global economy, we services businesses – both tions, will be consistent with would expect acquisitions to make because of their naturally low this strategy. We will continue to more of a contribution. Our capital requirements as well as our periodically review our portfolio objective is to grow the company successful history of acquiring to ensure that the operations that through the economic and and managing such fi rms. We will we own and operate are aligned insurance market cycles. continue to avoid acquiring or with this approach. We will focus developing businesses that require our growth on fulfi lling our vision Across our other businesses – signifi cant capital investment to to be one of the world’s great Mercer, Oliver Wyman, and Kroll – provide value. business enterprises. we are confi dent that the need for advice and solutions related to High cash generation. 2010 Goals issues such as retirement, health In the past two years, we have In 2010, we begin this work with care, human capital, business made great strides in improving several targeted objectives for the strategy, enterprise risk, and data and stabilizing the company’s year: security and recovery will only in- fi nancial performance. However, crease across a range of industries we fully recognize that maintain- 1. Grow the fi rm: For the past and developing economies. We ing earnings quality is critical to two years, our focus has been will grow organically by focusing our future success. We will seek to to stabilize the company and our businesses on these and other consistently generate signifi cant improve fi nancial performance, high-growth areas, and will free cash to fund acquisitions, while effectively managing make acquisitions as appropriate investments, and dividends. our overall business through opportunities arise. the downturn. Having been Low risk. successful at both, we return Low capital investment. Elite companies effectively mini- to the growth objective.