<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM 8-K
ON FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 3, 1998
- --------------------------------------------------------------------------------
(Date of earliest event reported)
Marsh & McLennan Companies, Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5998 36-266-8272
- ------------------------------ ---------------------------- --------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1166 Avenue of the Americas, New York, NY 10036
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 345-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Exhibit Index at page 4
<PAGE>
The undersigned registrant, Marsh & McLennan Companies, Inc. (the
"Registrant") hereby amends the following items of the Current Report on Form
8-K filed by the Registrant on December 23, 1998 (the "Original Form 8-K
filing") as set forth below.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The audited financial statements of Sedgwick for the year ended
December 31, 1997 are filed as Exhibit 99.1 to the Original Form 8-K
Filing and are not being filed herewith.
The Registrant hereby amends the unaudited financial statements for
the nine-months ended September 30, 1998 required to be filed
herewith and restates such items in their entirety as Exhibit 99.2
hereto.
(b) Pro Forma Financial Information.
The Registrant hereby amends the pro forma financial data required to
be filed herewith and restates such items in their entirety as
Exhibit 99.3 hereto.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MARSH & McLENNAN COMPANIES, INC.
By: /s/ Gregory Van Gundy
--------------------------------
Name: Gregory Van Gundy
Title: Secretary
Date: March 27, 2000
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
99.2 Consolidated Nine-Month Unaudited Financial Statements of Sedgwick
-Consolidated Statements of Income for the nine-months ended
September 30, 1998 and 1997
-Consolidated Balance sheet as of September 30, 1998
-Notes to Consolidated Financial Statements
-Additional information for US investors
99.3 Unaudited Pro Forma Condensed Combined Financial Statements.
4
<PAGE>
Exhibit 99.2
UNAUDITED INTERIM RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
SEDGWICK GROUP PLC
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Nine months ended September 30, 1998
<TABLE>
<CAPTION>
BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS TOTAL TOTAL
ITEMS (NOTE 2) 1998 1997 1998
----------- ----------- -------- -------- ------
(pound)m (pound)m (pound)m (pound)m US $M*
<S> <C> <C> <C> <C> <C>
REVENUE
Brokerage and Fees.................... 694.2 - 694.2 677.2 1,145.4
Interest and investment income........ 34.1 - 34.1 31.9 56.3
------ ------ ------ ------ --------
728.3 - 728.3 709.1 1,201.7
EXPENSES.............................. (712.2) (121.4) (833.6) (623.5) (1,375.4)
------ ------ ------ ------ --------
Operating profit/(loss)............... 16.1 (121.4) (105.3) 85.6 (173.7)
Share of profits of associated
Undertakings.......................... 3.5 - 3.5 3.1 5.8
Interest payable...................... (8.4) - (8.4) (7.0) (13.9)
Profit on disposal of businesses...... - 9.4 9.4 - 15.5
Cessation of insurance underwriting... - - - 0.3 -
------ ------ ------ ------ --------
PROFIT/(LOSS) BEFORE TAXATION......... 11.2 (112.0) (100.8) 82.0 (166.3)
Taxation.............................. (2.2) 25.7 23.5 (24.6) 38.8
------ ------ ------ ------ --------
PROFIT/(LOSS) AFTER TAXATION.......... 9.0 (86.3) (77.3) 57.4 (127.5)
Minority interests.................... 1.9 - 1.9 (0.3) 3.1
------ ------ ------ ------ --------
EARNINGS/(LOSS)....................... 10.9 (86.3) (75.4) 57.1 (124.4)
------ ------
DIVIDEND.............................. (16.7) (16.4) (27.5)
------ ------ --------
RETAINED EARNINGS/(LOSS).............. (92.1) 40.7 (151.9)
------ ------ --------
EARNINGS/(LOSS) PER SHARE
Before exceptional items.............. 2.0 p 10.4 p 3.2 c
------ ------ --------
After exceptional items............... (13.6) p 10.4 p (22.5) c
------ ------ --------
DIVIDEND PER SHARE.................... 3.0 p 3.0 p 5.0 c
------ ------ --------
Average number of shares in issue
(millions)............................ 554.1 548.4 -
</TABLE>
These results should be read in conjunction with the notes.
- ----------
*For illustration only, the unaudited consolidated statement of income for the
nine months ended September 30, 1998 shown above in US dollars has been
translated at the average rate of (pound)1 = US$1.65 and not the convenience
translation rate which would be (pound)1 = US$1.70 at September 30, 1998. The
average rate has been used for the purposes of providing pro forma results
set out in Exhibit 99.3. A summary of the significant adjustments that would
be required to restate net income for the nine months ended September 30,
1998 in accordance with US GAAP is set out under "Additional information for
US investors."
<PAGE>
UNAUDITED CONSOLIDATED BALANCE SHEET
As at September 30, 1998
<TABLE>
<CAPTION>
1998 1998
------- -------
(pound)m US $m*
<S> <C> <C>
ASSETS EMPLOYED
FIXED ASSETS
Tangible assets.......................................................... 209.5 356.2
Associated undertakings.................................................. 16.9 28.7
Assets backing retirement contracts...................................... 431.7 733.9
Investments.............................................................. 205.0 348.5
-------- --------
863.1 1,467.3
-------- --------
CURRENT ASSETS
Debtors.................................................................. 2,756.9 4,686.8
Reinsurers' share of technical provisions................................ 151.7 257.9
Investments.............................................................. 83.0 141.1
Cash and deposits........................................................ 502.8 854.7
-------- --------
3,494.4 5,940.5
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR........................... (3,160.1) (5,372.2)
-------- --------
NET CURRENT ASSETS....................................................... 334.3 568.3
-------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES.................................... 1,197.4 2,035.6
-------- --------
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Borrowings
Loans and other borrowings............................................... (84.1) (142.9)
7.25% Convertible Bonds 2008............................................. (41.5) (70.5)
-------- --------
(125.6) (213.4)
Other liabilities........................................................ (18.4) (31.3)
-------- --------
(144.0) (244.7)
PROVISIONS FOR LIABILITIES AND CHARGES
Liabilities linked to retirement contracts............................... (431.1) (732.9)
Insurance technical provisions........................................... (264.4) (449.5)
Other provisions......................................................... (254.7) (433.0)
-------- --------
103.2 175.5
FINANCED BY
SHAREHOLDERS' FUNDS...................................................... 105.1 178.7
MINORITY INTERESTS....................................................... (1.9) (3.2)
-------- --------
NET CAPITAL EMPLOYED..................................................... 103.2 175.5
</TABLE>
The balance sheet should be read in conjunction with the notes.
- ----------
*For illustration only, the unaudited consolidated balance sheet at September
30, 1998 shown above in US dollars has been translated at the period end rate of
(pound)1 = US$1.70. A summary of the significant adjustments that would be
required to restate shareholders' equity at September 30, 1998 in accordance
with US GAAP is set out under "Additional information for US investors."
2
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation
The results for the nine months ended September 30, 1998 have been prepared on
the basis of the accounting policies set out in the 1997 annual report.
No adjustments have been made to restate the results or the balance sheet to
comply with generally accepted accounting principles in the United States of
America (US GAAP).
Additional information for US investors follows the notes.
<TABLE>
<CAPTION>
2. Exceptional items
a. Operating exceptional items EXPENSES TAX EARNINGS
-------- -------- --------
(pound)m (pound)m (pound)m
<S> <C> <C> <C>
Pension transfer review...................... 115.0 (24.0) (91.0)
Restructuring costs.......................... 6.4 (1.7) (4.7)
-------- -------- --------
121.4 (25.7) (95.7)
-------- -------- --------
</TABLE>
Restructuring costs relate to certain of the group's European operations.
In 1997, there were no operating exceptional items.
Pension transfer review costs are stated net of (pound)54.0 million of expected
recoveries from third parties.
EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT AUDITORS
In October 1994, the Securities and Investments Board (SIB), now known as the
Financial Services Authority (FSA), issued its report, PENSION TRANSFERS AND
OPT-OUTS, REVIEW OF PAST BUSINESS. Its objective was to secure redress for
individuals who between April 29, 1988 and June 30, 1994 were wrongly advised to
transfer benefits from, or opt-out of, an occupational pension plan and enter
into a personal pension plan, and have thereby suffered actual or potential
loss.
Based on criteria and procedures set out in the SIB's report, Sedgwick is
required to review pension transfer and opt-out business conducted during the
relevant period and to determine whether redress should be made to clients. At
that time, the review was required to be conducted only in respect of
individuals considered by the SIB to be priority cases. Sedgwick has satisfied
the interim targets set by the regulator in this review and expects the review
to be completed by December 31, 1998.
On March 12, 1998, the FSA and the Personal Investment Authority (PIA) issued a
consultation document on the extension of the review to include non-priority
cases.
Based on Sedgwick's experience to date and with reference to the methodology
contained in the consultation document, the directors have recognized an
exceptional charge in the six months ended June 30, 1998 of (pound)80m and an
additional exceptional charge of (pound)35.0m during the third quarter ended
September 30, 1998, based on their best estimate of the cost to Sedgwick of
completing pension review (assuming expected recoveries from third parties).
It should be noted that the estimated cost of reviewing pensions may be subject
to change due to factors which are beyond Sedgwick's control, such as future
movements in long-term interest rates, equity markets, response rates, and the
precise scope and duration of the review. The "Final Statement of Policy and
Final Guidance" has been recently published by the FSA of which certain issues
remain under discussion.
3
<PAGE>
In view of the above uncertainties, the group has entered into insurance
arrangements specifically to protect it up to (pound)37m in the estimated
total cost of completing the review. The cost of this cover is included in
the (pound)115.0m exceptional charge recognized in the nine months ended
September 30, 1998. In addition, the group has an option to extend this cover
at additional cost to give protection of a further (pound)25m. The cost of
purchasing this option itself is also included in the exceptional charge.
There still remain potential exposures relating to pension review which are
excluded from the scope of this policy or may exceed its limits, but based on
current information available, management believes that no further material
adjustment is required to the provision made through September 30, 1998.
b. Profit on disposal of business
In January 1998, the group sold its managing agencies based in The
Netherlands for NLG 37 million ((pound)11.0 million) realizing a profit on
disposal of (pound)9.4 million.
c. Cessation of insurance underwriting
Cessation of insurance underwriting represents the net amount recognized in
respect of the group's insurance underwriting subsidiaries which are in run-off.
3. Nikols Sedgwick Group
EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT AUDITORS
In December 1998, Sedgwick disposed of its 49% interest in Nikols Sedgwick B.V.
following the exercise of the call option by Securfin S.p.A. and Securfin
Altrida B.V.
4
<PAGE>
ADDITIONAL INFORMATION FOR US INVESTORS
The results for the nine months ended September 30, 1998 have been prepared in
accordance with UK GAAP. Estimates of the effect on the group's net income of
applying the significant differences between UK GAAP and US GAAP are set out
below.
NET INCOME
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-----------------
1998 1997
-------- -------
(pound)m (pound)m
<S> <C> <C>
(LOSS)/EARNINGS REPORTED UNDER UK GAAP....................... (75.4) 57.1
Adjustments:
Amortization of goodwill and identifiable intangible assets.. (9.8) (9.1)
Other items.................................................. (32.9) 1.1
Deferred taxation............................................ (4.0) (2.8)
Deferred taxation on US GAAP adjustments..................... 12.9 1.2
-------- -------
NET (LOSS)/INCOME IN ACCORDANCE WITH US GAAP................. (109.2) 47.5
-------- -------
(LOSS)/EARNINGS PER ADS*
Reported under UK GAAP....................................... (68.1)p 52.1p
-------- -------
In accordance with US GAAP
Basic........................................................ (98.6)p 43.3p
Diluted**.................................................... (98.6)p 42.7p
-------- -------
</TABLE>
Comparative earnings per ADS figures under US GAAP have been restated in
accordance with FAS 128, EARNINGS PER SHARE.
- ----------
* Each American Depositary Security (ADS) represents five ordinary shares.
** Options exercisable under Sedgwick's share option schemes could dilute
basic earnings per ADS. However, as the options have an anti-dilutive
effect on net loss per ADS for the nine months ended September 30, 1998 as
Sedgwick had a loss from continuing operations, diluted net loss per ADS is
not presented.
5
<PAGE>
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
AT
SEPTEMBER 30,
1998
-------------
(pound)m
<S> <C>
SHAREHOLDERS' FUNDS REPORTED UNDER UK GAAP.......................... 105.1
Adjustments:
Goodwill and identifiable intangible assets......................... 211.7
Other items......................................................... (24.1)
Deferred taxation................................................... 20.5
Deferred taxation on US GAAP adjustments............................ 2.8
---------
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP..................... 316.0
---------
</TABLE>
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this document are made pursuant to the safe-harbor
provisions of the US Private Securities Litigation Reform Act of 1995. As a
result of, among other things, interest and exchange rate changes, regulatory
changes, and competition, actual results may differ materially from those
anticipated by, or which may be assumed from, statements made in this document.
6
<PAGE>
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statements of income for
the nine months ended September 30, 1998 (as amended) and the year ended
December 31, 1997 and the unaudited pro forma condensed combined balance sheet
as of September 30, 1998 (as amended) give effect to the acquisition of
Sedgwick. The purchase method of accounting has been applied to the transaction.
The pro forma statements of income assume the acquisition occurred on January 1,
1997 and the pro forma balance sheet assumes the transaction occurred on
September 30, 1998.
The unaudited pro forma statements of income do not include potential cost
savings that may be realized as a result of the acquisition or the effect of a
special charge that is expected to include, among other items, the Registrant's
cost (non-goodwill) related to severance arrangements, the closing of existing
facilities and the issuance of certain deferred stock units. The Registrant has
indicated that it anticipates ultimately achieving gross pretax cost savings in
the range of $200 million per year, over a period of years. See "Information
Concerning Forward-Looking Statements".
The unaudited pro forma condensed combined financial statements have been
prepared by the Registrant based upon the assumptions disclosed in the notes to
the pro forma condensed combined financial statements and reflect the
Registrant's expectation that it will acquire 100% of Sedgwick's issued share
capital and issued convertible bonds. The unaudited pro forma financial
statements presented herein are shown for illustrative purposes only and do not
purport to be indicative of the results which would have been reported if the
transaction had occurred on the dates indicated or which may occur in the
future. The unaudited pro forma condensed combined financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1998 and Annual Report on Form 10-K/A for the year
ended December 31, 1997 and the Sedgwick financial statements included in
Exhibits 99.1 and 99.2 of this Form 8-K.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
(In millions, except per share figures)
<TABLE>
<CAPTION>
Historical (1)
-----------------------------------
Marsh & McLennan Sedgwick Group, Pro Forma Pro Forma
Companies, Inc. as adjusted (a) Adjustments Combined
---------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue $ 5,245 $ 1,214 $ - $ 6,459
Expense 4,160 1,442 30 (b) 5,632
-------- ------- ------- --------
Operating Income (Loss) 1,085 (228) (30) 827
Interest, net (77) (4) (75) (c) (156)
-------- ------- ------- --------
Income (Loss) Before Income Taxes 1,008 (232) (105) 671
Provision (Benefit) for Income Taxes 398 (52) (26) (d) 320
-------- ------- ------- --------
Net Income (Loss) $ 610 $ (180) $ (79) $ 351
======== ======= ======= ========
Basic Net Income Per Share $ 2.38 $ 1.32
======== ========
Diluted Net Income Per Share $ 2.28 $ 1.25
======== ========
Average Number of Shares
Outstanding - Basic 256 10 (e) 266
======== ====== ========
Average Number of Shares
Outstanding - Diluted 264 10 (e) 274
======== ====== ========
</TABLE>
(1) Sedgwick's net loss for the nine months ended September 30, 1998
includes a $16 million exceptional pretax gain and a $200 million
exceptional pretax charge.
See accompanying notes to pro forma condensed combined financial statements.
2
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(In millions, except per share figures)
<TABLE>
<CAPTION>
Historical (1)
---------------------------------------------
Marsh & McLennan Sedgwick Group, Pro Forma Pro Forma
Companies, Inc. as adjusted(a) Adjustments Combined
(as amended) -------------- ----------- (as amended)
------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 6,009 $ 1,588 $ -- $ 7,597
Expense 5,211 1,436 39(b) 6,686
------- ------- -------- -------
Operating Income (Loss) 798 152 (39) 911
Interest, net (83) (6) (100)(c) (189)
------- ------- -------- -------
Income (Loss) Before Income Taxes 715 146 (139) 722
Provision (Benefit) for Income Taxes 281 61 (35)(d) 307
------- ------- -------- -------
Net Income (Loss) $ 434 $ 85 $ (104) $ 415
======= ======= ======== =======
Basic Net Income Per Share $ 1.77(2) $ 1.63
======= =======
Diluted Net Income Per Share $ 1.73(2) $ 1.59
======= =======
Average Number of Shares
Outstanding - Basic 245(2) 10(e) 255
======= ======= =======
Average Number of Shares
Outstanding - Diluted 251(2) 10(e) 261
======= ======= =======
</TABLE>
(1) Marsh & McLennan's expense includes special charges amounting to $244
million for the year ended December 31, 1997.
(2) Restated to reflect the three-for-two stock split in the form of a stock
distribution issued on June 26, 1998.
See accompanying notes to pro forma condensed combined financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
MARSH & MCLENNAN COMPANIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 (UNAUDITED)
(In millions of dollars) Historical (1)
---------------------------------
Marsh & McLennan Sedgwick Group, Pro Forma Pro Forma
Companies, Inc. as adjusted (f) Adjustments (g) Combined
--------------- --------------- --------------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 667 $ 340 $ -- $ 1,007
Receivables 1,704 637 -- 2,341
Less - allowance for doubtful accounts (68) (88) -- (156)
-------- -------- -------- --------
Net receivables 1,636 549 -- 2,185
Prepaid dealer commissions -
current portion 311 -- -- 311
Deferred tax assets 119 3 -- 122
Other current assets 113 88 -- 201
-------- -------- -------- --------
Total current assets 2,846 980 -- 3,826
-------- -------- -------- --------
Long-term securities 752 1,083 -- 1,835
Fixed assets, net 934 331 -- 1,265
Intangible assets 2,822 360 1,577(h) 4,759
Prepaid dealer commissions 823 -- -- 823
Other assets 551 64 -- 615
-------- -------- -------- --------
$ 8,728 $ 2,818 $ 1,577 $ 13,123
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term debt $ 480 $ 44 $ 200(i) $ 724
Accounts payable and accrued liabilities 1,880 309 -- 2,189
Accrued income taxes 354 47 -- 401
-------- -------- -------- --------
Total current liabilities 2,714 400 200 3,314
-------- -------- -------- --------
Fiduciary liabilities 2,570 571 -- 3,141
Less - cash and investments
held in a fiduciary capacity (2,570) (571) -- (3,141)
-------- -------- -------- --------
-- -- -- --
-------- -------- -------- --------
Long-term debt 1,280 235 1,386(i) 2,901
-------- -------- -------- --------
Other liabilities 1,157 1,645 -- 2,802
Commitments and contingencies -- -- -- --
Stockholders' equity:
Preferred stock -- -- -- --
Common stock 261 91 (91)(j) 271
10(e)
Other stockholders' equity 3,490 447 (447)(j) 4,009
519(e)
-------- -------- -------- --------
3,751 538 (9) 4,280
Less - treasury shares (174) -- -- (174)
-------- -------- -------- --------
Total stockholders' equity 3,577 538 (9) 4,106
-------- -------- -------- --------
$ 8,728 $ 2,818 $ 1,577 $ 13,123
======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
4
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
A description of the adjustments reflected in the pro forma condensed
combined financial statements follows:
(a) Certain amounts included in the Sedgwick consolidated statements
of income (interest income, interest expense, equity in income
of affiliates and minority interest in income of subsidiaries)
have been reclassified to conform with the Registrant's
financial statement presentation and have been presented in
accordance with U.S. Generally Accepted Accounting Principles.
(See note 32 of the financial statements in Exhibit 99.1 and
Additional information for US investors in Exhibit 99.2) Results
for the year ended December 31, 1997 and the nine months ended
September 30, 1998 have been translated at (pound) = US$1.64
and (pound) = US$1.65, respectively.
(b) To reflect the incremental estimated annual goodwill
amortization charge associated with the acquisition of Sedgwick
(the "acquisition"). Goodwill is estimated at $1.577 billion and
is being amortized over a forty-year period.
(c) To record the additional annual interest expense associated with
the estimated $1.586 billion of incremental debt that is
expected to be incurred by the Registrant as a result of the
acquisition. The assumed interest rate of 6.31% represents the
weighted average interest rate of the expected incremental debt
based on prevailing rates. The actual interest rate may vary
from the assumed rate. The annual effect on pretax income of a
one-eighth percent variance in this rate is $2.0 million.
(d) To record the tax effect of the pro forma adjustments related to
the additional annual interest expense. The assumed tax rate of
35% represents the federal tax benefit on the estimated
incremental interest expense. The Registrant does not anticipate
any state and local tax benefit on this interest expense.
(e) To reflect the issuance of $529 million (10 million shares) of
the Registrant's $1 par value common stock representing the
estimated portion of the acquisition cost to be financed through
equity.
(f) Certain amounts included in the Sedgwick consolidated balance
sheet have been reclassified to conform with the Registrant's
financial statement presentation. In particular, fiduciary cash
and investments of $571 million have been offset against the
related liabilities and presented in the liability section of
the balance sheet. In addition, receivables and payables for
uncollected premiums and claims are presented in footnote
disclosure in the Registrant's financial statements. The balance
sheet has been translated at (pound) = US$1.70.
5
<PAGE>
(g) The Registrant's management is in the preliminary stages of
identifying the impact of purchase related matters, principally
related to severance, duplicative real estate, and adjustments
of asset and liability balances to fair values. The preliminary
estimate of these purchase related matters of $600 million and
the related income tax benefit of $210 million, which may differ
from the final resolution of such items, are not included in the
pro forma financial statements.
(h) Represents the excess of the $2.115 billion acquisition
consideration over the $538 million acquired net assets of
Sedgwick. The Registrant's management is in the process of, but
has not completed, identifying intangibles or fair values of
assets acquired and liabilities assumed. Since there are no
known adjustments at this time, the fair values of assets and
liabilities are assumed to be the carrying values on the
Sedgwick balance sheet and the excess of the acquisition
consideration over the acquired net assets has been allocated to
goodwill. The preliminary purchase price allocation to the
underlying assets and liabilities of Sedgwick, including
goodwill, is subject to further refinement as the Registrant's
management continues to review the estimated fair values of the
assets acquired and the liabilities assumed. The final purchase
price allocation could be materially different from this
preliminary allocation.
(i) To reflect the incremental debt assumed to be incurred to
finance $1.586 billion of the acquisition.
(j) To record the elimination of $538 million of Sedgwick
stockholders' equity.
6
