Marsh & McLennan Companies Q1 2010 Earnings Call Transcript

Marsh & McLennan Companies Q1 2010 Earnings Call Transcript
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Marsh & McLennan Companies (MMC)

Q1 2010 Earnings Call

May 04, 2010 8:30 am ET

Executives

Vanessa Wittman - Chief Financial Officer and Executive Vice President

Daniel Glaser - Chairman of Marsh Inc and Chief Executive Officer of Marsh Inc

M. Burns - Chairwoman of Mercer Human Resource Consulting and Chief Executive Officer of Mercer Human Resource Consulting

Peter Zaffino - Chief Executive Officer of Guy Carpenter and President of Guy Carpenter

Brian Duperreault - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Finance Committee

Analysts

Thomas Spikes Mitchell

Keith Walsh - Citigroup Inc

Larry Greenberg - Langen McAlenney

Jay Cohen - BofA Merrill Lynch

Meyer Shields - Stifel, Nicolaus & Co., Inc.

Brian Meredith - UBS Investment Bank

Presentation

Operator

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Welcome to the MMC's conference call. [Operator Instructions] First quarter 2010 financial results and supplemental information were issued earlier this morning. They are available on the MMC website at www.mmc.com.

Before we begin, I would like to remind you that remarks made today may include statements relating 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 the MMC's most recent SEC filings as well as the company's earnings release which are available on MMC's 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 over this call to Brian Duperreault, President and CEO of MMC.

Brian Duperreault

Good morning, and thank you for joining us to discuss our first quarter results reported earlier today. I'm Brian Duperreault, President and CEO of MMC. Joining me in presenting on the call today is Vanessa Wittman, our CFO. I'd also like to welcome our operating company's CEOs to today's call: Dan Glaser of Marsh, Peter Zaffino of Guy Carpenter, Michele Burns of Mercer, John Drzik of Oliver Wyman, and Ben Allen of Kroll. Also with us is Mike Bischoff, our Head of Investor Relations.

I'll begin with some brief comments on the quarter before turning it over to Vanessa to provide additional information regarding our financial results. Then we would be happy to take your questions.

I am pleased to report that Marsh & McLennan’s Companies first quarter earnings performance was very encouraging. Vanessa will go into more detail, but let me say that each of our operating companies is doing an excellent job in managing their respective businesses including carefully controlling their operating expenses. Our performance is all the more impressive in light of the substantial challenges presented by the global recession. Despite signs that recessionary conditions are ebbing, economic weakness continues to affect our operating segments.

Also, we continue to face soft market conditions in the global property-casualty commercial insurance marketplace. We are now in a seventh year of price declines and, frankly, we see no indication that the overall insurance market will change any time soon. In addition to successfully managing Marsh and Guy Carpenter through extremely turbulent times, Dan, Peter and their management teams are continuing to position their businesses for the future.

In the first quarter, several positive trends that Marsh has generated over the past two years continued: growth in new business, solid client revenue retention rates, and a focus on controlling operating expenses. At the same time, management is implementing its strategy to improve operational efficiencies, strength in financial results and deliver superior risk and insurance capabilities to clients. And with its improved operating performance, Marsh is turning its attention to growth.

In the past six months, we've announced seven acquisitions, the largest being HSBC Insurance Brokers. HSBC is a strong fit with Marsh, both operationally and geographically. The transaction was closed April 1, deepens Marsh's presence in the U.K., Hong Kong, Singapore, China and the Middle East. This acquisition should add annualized revenue of approximately $200 million.

As part of this acquisition, we have also entered into a strategic partnership but HSBC Bank, one of the largest banks in the world, in giving us preferred access to provide insurance broking and risk-management services to HSBC and their corporate and private clients.

Five of our recently-announced acquisitions are part of the Marsh & McLennan Agency initiative. On last quarter's call, I mentioned that we acquired Insurance Alliance, based in Houston; NIA Group, based in New Jersey; and in February of this year, we acquired Haake Companies, based in Kansas. In March, we announced our largest agency acquisition yet, Thomas Rutherfoord, Inc., based in Virginia. Rutherfoord, with revenues exceeding $80 million, has more than 300 employees located from Philadelphia to the Gulf Coast.

And yesterday, we announced the acquisition of Bostonian Group, one of the largest regional brokerages in New England. The firm specializes in employee benefits and has a revenue of approximately $14 million. As you know, our strategy for the Marsh & McLennan Agency initiative is to establish about 10 hubs throughout the United States. As you can see, we’re making great progress toward this objective.

Guy Carpenter's results in the first quarter of 2010 reflect the positive themes we've talked about for the past year: excellent new business development, strong client revenue retention that remains at historically high levels, and a disciplined approach to expense management. Together, these factors resulted in underlying revenue growth in the quarter, which is impressive when you consider the difficult operating environment and that Guy Carpenter achieved the 10% increase in underlying revenue growth in the first quarter of last year.

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