Marsh & McLennan Companies, Inc. Q4 2010 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)

Question: Keith Walsh - Citigroup - Analyst: Good morning, everyone. I have two questions. First for Dan, just thinking about you guys are more of primarily a fee business, Marsh in the US. Can you talk a little bit about the leverage to improving exposures in a fee business versus maybe your competitors a little more commission based? And then the second piece of that, it seems every broker is facing expense inflation. How do you think about that to make sure shareholders are getting the leverage of a better top line? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Dan Glaser - Marsh & McLennan Companies, Inc. - Chairman and CEO of Marsh

Question: Keith Walsh - Citigroup - Analyst: Okay, great. And then just for Vanessa, thinking about -- you mentioned the pension expense. I think you guys are the only ones out there that still have an active pension plan if I'm correct. Why not freeze the plan at this point? If you could just talk to that.

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Question: Keith Walsh - Citigroup - Analyst: Yes.

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Question: Keith Walsh - Citigroup - Analyst: Thanks a lot.

Question: Brian Meredith - UBS - Analyst: Two questions for you all. The first one on the Consulting side. Can you dig in a little bit on the outsourcing revenue growth in the quarter? Was it new business, or was it growth from just exposures, payrolls? Can you give us a little more detail on that?

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Answer By: Michele Burns - Marsh & McLennan Companies, Inc. - Chairman and CEO of Mercer

Question: Brian Meredith - UBS - Analyst: Are you seeing any benefit from the other large merger in the industry?

Answer By: Michele Burns - Marsh & McLennan Companies, Inc. - Chairman and CEO of Mercer

Question: Brian Meredith - UBS - Analyst: Great. And then for Dan, could you -- we know what the organic revenue growth and obviously know what the revenues look like from the recent acquisitions. What was the earnings contribution like from some of the recent acquisitions? Are they still a pretty big drag on margins? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Dan Glaser - Marsh & McLennan Companies, Inc. - Chairman and CEO of Marsh

Question: Brian Meredith - UBS - Analyst: Okay. And I was thinking specifically also on the HSBC acquisition, whether -- because I know there was several -- some of the restructuring charges coming through were on that one. Is that positive from an earnings perspective yet?

Answer By: Dan Glaser - Marsh & McLennan Companies, Inc. - Chairman and CEO of Marsh

Question: Brian Meredith - UBS - Analyst: Excellent. Thank you.

Question: Matthew Heimermann - JPMorgan Chase & Co. - Analyst: Two questions. First, for Dan, just on the agency acquisition, so could you give us a sense of what inning we are in, in terms of building a platform? And then also, I guess for John, can you just give us a sense of where the pipeline is in Oliver Wyman today and how that maybe compares to 12 months ago?

Answer By: Dan Glaser - Marsh & McLennan Companies, Inc. - Chairman and CEO of Marsh

Question: Matthew Heimermann - JPMorgan Chase & Co. - Analyst: Is that -- is that -- so is the delta between the $750 to $1 billion and the $300 million today all going to be acquisitions or what role will organic growth play in getting you there? ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Dan Glaser - Marsh & McLennan Companies, Inc. - Chairman and CEO of Marsh

Question: Matthew Heimermann - JPMorgan Chase & Co. - Analyst: Okay. Thank you.

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Answer By: John Drzik - Marsh & McLennan Companies, Inc. - President and CEO, Oliver Wyman Group

Question: Matthew Heimermann - JPMorgan Chase & Co. - Analyst: Okay. Thank you very much.

Question: Larry Greenberg - Langen McAlenney - Analyst: Good morning. I might have misheard this, but it almost sounded as if in your opening comments and in Vanessa's comments, that you were kind of emphasizing the competitive conditions in the reinsurance business. And I'm just wondering if you are all sensing that perhaps reinsurance competition is taking a ratchet up a little bit? And maybe you could just -- maybe Dan and Peter and Brian, certainly, if you want to chime in, just on what pricing looks like out there on the underwriting side. ¬2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Answer By: Peter Zaffino - Marsh & McLennan Companies, Inc. - President and CEO of Guy Carpenter

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Question: Larry Greenberg - Langen McAlenney - Analyst: Great, thanks. Just a follow-up. We could play around with the numbers, but do you have what the underlying growth in the business units would have been excluding pension in 2010?

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Answer By: Vanessa Wittman - Marsh & McLennan Companies, Inc. - EVP and CFO

Question: Larry Greenberg - Langen McAlenney - Analyst: Great. That's helpful. Thank you.

Question: Meyer Shields - Stifel Nicolaus - Analyst: Brian, I saw you quoted at a conference saying that you don't necessarily need a macro event to change pricing. Sometimes carriers just get exhausted by the fact that their business is unprofitable. Is there any actual sign of that yet?

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Question: Meyer Shields - Stifel Nicolaus - Analyst: No; I'm sorry to hear that.

Answer By: Brian Duperreault - Marsh & McLennan Companies, Inc. - President and CEO

Question: Meyer Shields - Stifel Nicolaus - Analyst: Yes, no, that's very helpful. One quick question for Vanessa. I might have missed it, but the tax rate was higher than we anticipated in the quarter, and I was hoping you could explain that.

Answer By: Vanessa Wittman - Marsh & McLennan Companies, Inc. - EVP and CFO

Question: Meyer Shields - Stifel Nicolaus - Analyst: Okay, great. Thanks so much.

Question: Yaron Kinar - Deutsche Bank Securities - Analyst: Good morning. I was wondering if you could maybe give a little more color on the, what I would say is robust underlying revenue growth, in both RIS and consulting. Are you achieving that through improved pricing, more discretionary spending, exposure growth, taking market share?