Marsh & McLennan Companies' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Marsh & McLennan Companies (MMC)

Q4 2011 Earnings Call

February 14, 2012 8:30 am ET


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

Daniel S. Glaser - Chief Operating Officer and Group President

Vanessa A. Wittman - Chief Financial Officer and Executive Vice President

Alexander S. Moczarksi - Executive Officer

Peter Zaffino - Chief Executive Officer of Marsh Inc and President of Marsh Inc

John Drzik - Chief Executive Officer of Oliver Wyman Group and President of Oliver Wyman Group


Keith F. Walsh - Citigroup Inc, Research Division

Jay A. Cohen - BofA Merrill Lynch, Research Division

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

Yaron Kinar - Deutsche Bank AG, Research Division

Jay Gelb - Barclays Capital, Research Division

Larry Greenberg - Langen McAlenney

Adam Klauber - William Blair & Company L.L.C., Research Division

Raymond Iardella - Macquarie Research

Michael Nannizzi - Goldman Sachs Group Inc., Research Division

Michael Zaremski - Crédit Suisse AG, Research Division

Dan Farrell - Sterne Agee & Leach Inc., Research Division



Welcome to Marsh & McLennan Companies Conference Call. Today's call is being recorded. Fourth quarter 2011 financial results and supplemental information were issued earlier this morning. They are available on Marsh & McLennan Companies' website at

Before we begin, I would like 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 2012 or supplemental periods are forward-looking statements and Marsh & McLennan Companies' actual results may be affected by a variety of factors. Please refer to Marsh & McLennan Companies' most recent SEC filings as well as the company's earnings release, which are available on the Marsh & McLennan Companies' 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 would now like to turn the conference over to Mr. Brian Duperreault, President and CEO of Marsh & McLennan Companies

Brian Duperreault

Good morning, and thank you for joining us to discuss our results as reported earlier today. I'm Brian Duperreault, President and CEO of Marsh & McLennan Companies. Joining me on the call today is Dan Glaser, Group President and CEO; and Vanessa Wittman, our CFO. Also, I'd like to welcome our Operating Company CEOs, Peter Zaffino of Marsh; Alex Moczarski of Guy Carpenter; Julio Portalatin of Mercer; and John Drzik of Oliver Wyman. Also with us is Mike Bischoff.

My remarks will focus primarily on our full-year results and Dan will provide more detail on the fourth quarter. Vanessa will then update you on our financial position. Before we begin the discussion of our results, I'd like to welcome Julio to our company. Julio joined us as President and CEO of Mercer 2 weeks ago. He comes to us from AIG, where he held a broad range of senior positions over 19 years. Most recently, he was President and CEO of Chartis Growth Economies. Julio has had a very successful track record of running large global businesses. His strong leadership characteristics and international experience will serve him well as Mercer’s CEO.

Now let's move to our financial results. I'm very pleased that we continue to deliver revenue and earnings growth across the enterprise. Marsh & McLennan's performance this year was outstanding. In 2011, we generated revenue growth of 9% with 5% growth on an underlying basis. Importantly, we continue to achieve this revenue growth while maintaining control over expenses with adjusted underlying expenses increasing 4%. As a result, we produce a 12% growth in adjusted operating income for the year. In fact, this is the second consecutive year that both of our operating segments achieved double-digit growth in operating income.

You've heard me talk many times since our September 2010 Investor Day about our plans to produce double-digit organic growth in adjusted operating income. Over the past 2 years, we have delivered against that goal, averaging 11% growth. Within Risk and Insurance Services, revenue increased 9%. Importantly, underlying revenue growth of 5% represents a significant increase from the 2% underlying growth in the prior year, and we generated 12% growth in adjusted operating income and margin improvement.

Marsh produced underlying revenue growth of 4% with all major geographies contributing. This was driven by higher client retention rates and new business development. Guy Carpenter also produced impressive results in 2011. Underlying revenue growth was 5% driven both ongoing revenue and new business development and higher retention rates. This was a milestone year for Carpenter as well as revenue exceeded $1 billion for the first time.

The Consulting segment also delivered an impressive performance. Revenue grew 9% with underlying growth of 5%. Adjusted operating income rose 12% and the segment margin improved as well. Mercer produced underlying revenue growth of 4% and Oliver Wyman's growth was 7% for the second straight year.

So in summary, throughout Marsh & McLennan last year, we saw revenue increases and higher levels of profitability. We are very pleased with this performance, which confirms the investment case we articulated at Investor Day in September 2010. We generated organic growth and adjusted operating income of 12%. Growth in adjusted EPS was 13%, excluding the early debt retirement and these are the earnings from which we plan to grow this coming year. Our dividend yield averaged 3%. We maintained low capital requirements. We generated high levels of cash and we made progress on lowering the company's risk profile. As we move forward, we remain committed to focusing on profitable growth and prudent deployment of our excess cash flow in order to produce outstanding long-term returns for our shareholders.

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