JARDINE LLOYD THOMPSON GROUP P.L.C.

Jardine House, 6 Crutched Friars, London EC3N 2HT;

44-171-528-4444; fax: 44-171-528-4185

1997 1996

Premium volume* $3.74 billion $3.79 billion

Gross revenues $402,948,000 $391,560,000

Brokerage revenues $394,889,040 $383,728,800

Brokerage: Retail 46% 51%

Wholesale 34% 29%

Reinsurance 18% 18%

Investment income 2% 2%

Employees 3,393 3,629

Rev./employee $116,383 $105,740

Offices 66 65

* Estimated. Converted at applicable exchange rates.

Having completed integration of the two companies that merged in 1997 to form Jardine Lloyd Thompson P.L.C., the brokerage now is well-positioned to meet clients' needs, says its top executive.

Ken Carter, chief executive of JLT, said the merger of JIB Group P.L.C. and Lloyd Thompson Group P.L.C. in February 1997 was driven primarily by client demand for more choice among the world's larger brokers.

Concerned by consolidation in the brokerage industry after the spate of acquisitions being made by megabrokers Marsh & McLennan Cos. Inc. and Aon Corp., many clients "wanted a strong and numerate broking industry," said Mr. Carter. JLT is now in a position to be an alternative choice for those companies, he said.

"What we can offer to the types of client whose business we're seeking is a very viable alternative option. . .We can deliver our performance both for clients and for shareholders and thereby create a working environment which enables us to keep attracting and retaining the very best people in the industry," Mr. Carter stated.

The financial benefits of the merger should start filtering through this year, the chief executive said. In 1997, however, soft global insurance market conditions resulted in decreased revenues.

JLT's total corporate revenues dipped 2% to L246 million last year, from a pro forma L251 million generated by the two firms in 1996. Converted to U.S. dollars using average exchange rates, revenues rose 2.9% to $402.9 million.

JLT's brokerage revenues also slipped 2% to L241.1 million.

In dollar terms, brokerage revenues were up 2.9% to $394.9 million, making JLT the sixth-largest broker in Business Insurance's annual ranking of the world's largest brokers. The newly combined JLT also ranked as No. 6 a year ago.

Although JLT added new business in 1997, revenues declined due to exchange rate fluctuations and continued soft market conditions, particularly in JLT's key sectors of marine, energy and reinsurance.

In Asian markets, where the broker has a strong presence, economic difficulties prevented the group from making stronger gains in the region.

Last year's overall financial performance -- including a 3% increase in profits before taxes and exceptional items to L50.5 million ($82.7 million) -- was very much what had been anticipated for the combined broker's first year, maintained Mr. Carter. The merger resulted in L26.3 million ($43.1 million) of exceptional charges, of which L10.4 million ($17 million) related to the elimination of surplus office property and the remainder to the costs of the transaction and reorganization expenses.

JLT Chairman John Barton pointed out that cost savings resulting from the merger through such items as consolidated offices and a reduction in employee numbers to 3,393 from 3,629, reached about L3 million ($4.9 million) in 1997. For 1998, the broker expects an additional L8 million ($13.1 million) in cost savings, he said.

JLT regards 1997 as a year for pulling together the threads of the merger and achieving synergies and 1998 as the year that will demonstrate the financial sense behind forming the enlarged broker.

This is the year when merging the international operations, specialty business and large revenues of JIB Group with the essentially London-based business of the smaller Lloyd Thompson Group should be justified, Mr. Carter said.

Mr. Carter, who had been chief executive of Lloyd Thompson prior to the merger, also maintains that the union of the two companies enables Lloyd Thompson's skills as a London market broker to be used on a greater variety of risks.

"We're now working together as a team. . . .If you've got harmony at the top, that sets the pattern, and it filters down," Mr. Carter said.

A major accomplishment last year was the formation in January of a strategy to bring JLT's combined resources to bear on six key business areas: shipowners, energy, construction, local government entities, accident and health, and affinity business.

These are markets in which JLT either already has a significant position and wants to expand, or where it has a small position but believes, as in the case of accident and health business, that there is opportunity for growth, explained Mr. Carter.

One means JLT will employ to serve these targeted specialties is alternative risk transfer services.

Devising alternative risk transfer solutions when appropriate is now a way of doing business, rather than being a separate speciality within the company, according to Mr. Carter. These techniques and solutions can be applied as readily to offshore oil companies as to pharmaceuticals, shipping or any other line of risk, he said.

In spite of the soft global prop-erty/casualty insurance market, there is still abundant interest in alternative risk transfer mechanisms, he said.

Alternative risk transfer is an area where the London market expertise of Lloyd Thompson and the global experience of JIB Group mesh, Mr. Carter said.

London still is a center for insurance expertise and fertile ground for new ideas, he noted. This expertise and these ideas are now more exportable than ever for application to risks in other markets around the world.

JLT's operations are divided into four business groups:

* International Insurance Group. This division comprises JLT's London market broker and consulting arm, Lloyd Thompson Ltd., and principally wholesale brokerage subsidiaries that offer risk management, consulting and captive management services.

Clients range from major multinational corporations and captive insurers to other insurance brokers, and the business spans all areas of marine, non-marine and aviation.

The International Insurance Group's 1997 revenues fell 2.1% to oe76.2 million ($124.8 million), mainly as a result of plunging insurance rates, which were cut by up to 50% on some lines and were only partly offset by new business.

JLT reported that its property, casualty, construction, energy, financial risks and fine arts divisions, all of which are under the International Insurance Group umbrella, all achieved growth in 1997.

In the United States, its general surplus lines broker, underwriting agent and claims settling agent, HG Holdings Corp., achieved good growth and is expanding its product lines and services.

JLT last year acquired the 51% of shares it did not already own in Triangle Group, a Bermuda-based broker and captive manager. Also in Bermuda, it set up JLT Financial Solutions after acquiring a majority interest in Financial Solutions Ltd., which has offices in Bermuda and Sweden specializing in alternative risk transfer.

In London, JLT acquired Colburn French & Kneen Ltd., a Lloyd's of London marine broker specializing in Greek shipping business.

* International Reinsurance Group. This group is made up of reinsurance brokerage operations in the United Kingdom, the United States and the Asia-Pacific region.

U.S. expansion, where subsidiaries Jardine Sayer & Co. Inc. and Intermediary Insurance Services Inc. developed new products to expand their specialist reinsurance roles, helped check the reinsurance group's drop in revenues, which declined 2.1% to L40.1 million ($65.7 million).

* Specialty Group. JLT's specialty division comprises most of the retail business, financial risks, employee benefits, accident and health, and affinity group business in Northern Europe, North America and South America.

This group saw revenues climb 6.5% to L65.9 million ($107.9 million), helped by acquisitions and a "significant" improvement in the profitability of U.K. retail business.

In May 1997, it acquired Administrative Consultants Inc. in the United States, bringing it additional claims administration capabilities.

JLT also operates a joint venture with the British Medical Assn. that sells medical malpractice liability insurance to physicians.

* Asia Pacific Group. This unit operates 46 offices in 15 countries. Despite the economic conditions locally, brokerage revenues for this division last year held steady at L43.6 million ($71.4 million).

The group cited its performance in Australia as being particularly strong as income expanded with new business successes. While the economic problems in Asia prevented JLT from increasing its revenues there, the broker contends that it maintained its market position generally; achieved good results in Indonesia, Singapore and the Philippines; and benefited from the continued stability of the Hong Kong dollar, which accounts for a substantial part of Asian income.

Mr. Carter emphasized that JLT remains committed to Asia, which is still a very important part of its business. Its largest shareholder, Jardine Matheson Holdings, with a 34% stake, was founded in 1832 in China and continues to operate a business strategy wholly focused on Asia, he said.

JLT also owns a 36.75% stake in the sixth-largest French insurance broker, Societe Intercontinentale d'Assurances pour le Commerce et l'Industrie S.A. SIACI is almost entirely devoted to serving corporate clients, with 50% of its portfolio in property/casualty lines, 33% in marine and 16% in employee benefits.

JLT wants to build on SIACI with further alliances, though Mr. Carter prefers to keep the investment in SIACI on a minority basis because he believes a French broker dealing with French clients is best run by a French executive and management.

Mr. Carter adds that JLT is interested in further European expansion, but declined to say where or in what product areas he would like this expansion to take place.

Besides Messrs. Barton and Carter, other principal officers are: Dominic Collins, CEO-International Insurance Group; David Corben, CEO-International Reinsurance Group; Dennis Guy, CEO-Australia; John Hasting-Bass, CEO-Specialty Group; Steve McGill, CEO-Asia; and George Stuart-Clarke, group finance director.

JLT stock traded at a high of 206 pence ($3.43) and a low of 151 pence ($2.51) during 1997. The stock was trading at 178 pence ($2.96) per share as of July 10.

Tony Silverman, a stock analyst with BT Alex. Brown, a unit of Bankers Trust International P.L.C., said with integration of the merged group now complete "revenue progress will be a feature of 1998."

He forecasts a steady increase in profits for JLT over the next three years, including a L7 million ($11.4 million) rise in pretax profits this year to L57.5 million ($93.9 million). While this earnings estimate is L2 million ($3.3 million) less than Mr. Silverman had forecast six months earlier, he explained that JLT's remuneration costs should rise as it recruits more good-quality brokers.

"If the recruitment works well, there may be scope to upgrade the forecast later in the year," he said.