Marsh & McLennan CEO Discusses Q3 2010 - Earnings Call Transcript
Marsh & McLennan Companies (
)
Q3 2010 Earnings Call
November 9, 2010 8:30 am ET
Executives
Brian Duperreault – President, Chief Executive Officer
Vanessa Wittman – Chief Financial Officer
Daniel Glaser – President, Chief Executive Officer, Marsh
Michele Burns – Chairman, Chief Executive Officer, Mercer
Michael Bischoff – Head of Investor Relations
Analysts
Keith Walsh – Citi
Brian Meredith – UBS
Larry Greenberg – Langen McAlenney
Meyer Shields – Stifel Nicolaus
Jay Cohen – Bank of America Merrill Lynch
Adam Klauber – Macquarie Group
Jay Gelb – Barclays Capital
Thomas Mitchell – Miller Tabak
Presentation
Operator
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Marsh & McLennan Companies, Inc. Q3 2009 Earnings Call Transcript
Welcome to MMC’s conference call. Today’s call is being recorded. Third quarter 2010 financial results and supplemental information were issued earlier this morning. They are available on MMC’s webcast at
.
Before we begin, I would like to remind you that remarks made today may include statements related to future events or results which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to inherent risks and uncertainties. In particular, references during this conference call to anticipated or expected results of operations for 2010 or subsequent periods are forward-looking statements, and MMC’s actual results may be affected by a variety of factors. Please refer to MMC’s most recent SEC filings as well as the Company’s earnings release which are available on the MMC website for additional information on factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
I’ll now turn this call over to Brian Duperreault, President and CEO of MMC.
Brian Duperreault
Thank you. Good morning, and thank you for joining us to discuss our third quarter results reported earlier today. I’m Brian Duperreault, President and CEO of MMC. Joining me and presenting on the call today is Vanessa Wittman, our CFO. I’d also like to welcome our operating company CEOs to today’s call – Dan Glaser of Marsh, Peter Zaffino of Guy Carpenter, Michele Burns of Mercer, and John Drzik of Oliver Wyman. Also with us is Mike Bischoff, our Head of Investor Relations.
I am pleased to report that in the third quarter, MMC produced strong revenue growth of 7%, or 4% on an underlying basis. We are seeing some signs that the effects of the Great Recession are diminishing; however, overall economic conditions remain weak. Also, the insurance services segment continues to face the challenges presented by soft market conditions in the global property casualty marketplace.
Even in this difficult operating environment, however, each of our four operating companies produced revenue growth on both a reported and an underlying basis. This is the first quarter this has occurred since 2007.
About six weeks ago, MMC held its first investor day under this management team. I was very pleased so many members of the investment community were able to attend, and many others took advantage of the opportunity to watch our live video webcast. The entire program, which included presentations by each of the heads of our operating companies as well as Vanessa’s financial overview, remains available for viewing on our website, mmc.com.
I would like to spend a few minute reinforcing some of the major themes I talked about at investor day in making the investment case for MMC. IN the 40 years after Marshall McLennan Companies became a public company in 1962, two of our most notable hallmarks were sustained growth in adjusted earnings per share and total return to shareholders. However, MMC operated in a crisis mode from late 2004 through the end of 2007. As a result, new management was installed nearly three years ago.
Since then, we have successfully resolved legacy issues that prevented the Company from operating at its fullest potential. Today MMC is comprised of four great companies – Marsh, Guy Carpenter, Mercer, and Oliver Wyman. Each is a leader in its field and is led by a strong management team focused on enhancing growth and revenue, and more importantly, earnings. Our goal is to establish MMC as an elite global growth company, not just in relation to our direct competitors but with respect to other leading global companies.
To return to a record of superior long-term performance, we will focus on four major pillars in the coming years. First, growth. We are committed to generating long-term revenue and earnings growth. MMC should produce long-term organic revenue growth at least equal to global GDP growth augmented by acquisitions; and a continuing focus on expense discipline should expand margins and lead to 10% growth in operating income in a multitude of operating environments.
We are beginning to see the results of this strategy in MMC’s financial performance for the first nine months of 2010 which is more indicative of our performance than any one particular quarter. Through the third quarter, MMC produced 11% growth in adjusted operating income. This was in an operating environment in which MMC’s underlying revenue rose 2% but adjusted underlying expenses were held to only 1%.
Also contributing to long-term earnings growth is prudent and effective capital management, including the disciplined redeployment of excess cash into accretive acquisitions and share repurchase. We have completed six acquisitions so far in 2010. Four of these were in the risk and insurance services segment, including Haight (phon) Companies, Thomas Rutherford, and the Bostonian Group. These were part of our Marsh McLennan agency strategy. We also acquired the insurance broking operations of HSBC.
In the third quarter, we completed two acquisitions at Mercer. In July we acquired Innovative Process Administration, a provider of health and benefit recordkeeping and employment enrollment technology; and in August we acquired ORC Worldwide, a premier provider of HR knowledge, data and solutions.
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