MMC TO LAY OFF 3,000:

Marsh & McLennan Companies Inc. (MMC) revealed it would lay off about 3,000 employees to reduce annual expenses by $400 million. About three-quarters of the layoffs will occur in the insurance and risk management sectors. Market services revenues declined to $46 million in the third quarter of 2004 from $177 million in the prior year. In addition, in its third quarter report, MMC announced new initiatives that will lead to annual cost savings of approximately $400 million. MMC also established a $232 million reserve to be used in connection with any settlement agreement that may be reached with the New York Attorney General; and a $40 million settlement agreement in principle reached with the SEC concerning Putnam’s disclosure of brokerage allocation practices prior to 2004. Third quarter 2004 consolidated revenues increased 5 percent to $3 billion; net income was $21 million or $.04 per share; and operating cash flow was strong in the third quarter. Since the New York Attorney General filed a civil lawsuit on Oct. 14, MMC said it has “acted quickly and decisively” to address legal and regulatory issues and restore confidence in the company. New leadership was installed. Michael Cherkasky was named president and CEO upon the resignation of Jeffrey Greenberg, former chairman and CEO. “This has been a difficult time for the company,” Cherkasky said. “We recognize the seriousness of the problems we are facing and are moving quickly to correct them.” Cherkasky addressed the issue of employee morale. “Employees are the lifeblood of our organization, and we know they have been hurt by the situation at Marsh. As a result, we are in the process of developing compensation programs to retain, motivate, and reward employees.” He said MMC is examining all parts of the company’s cost structure to identify areas where expenses can be reduced appropriately. “Unfortunately, we must also adjust staff levels based on the realities of the marketplace and our current situation. On a global basis, we are reducing staff by five percent, or approximately 3,000 positions, with three quarters coming from risk and insurance services. This is a difficult but necessary step, and we are committed to carrying out these reductions fairly.” He said the 3,000 jobs to be cut include those tied to the previously announced combination of the defined contribution administration business of Putnam with Mercer’s human resources outsourcing operations as well as the integration of Kroll. MMC expects this latest round of decisions to result in pretax restructuring charges of approximately $325 million over the next six months. The elimination of certain discretionary expenses and the effect of the restructuring should result in annual cost savings of approximately $400 million when fully implemented.