Daniel S. Glaser - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Finance Committee J. Michael Bischoff - Chief Financial Officer Alexander S. Moczarski - Chairman of Marsh & Mclennan Companies International, Chief Executive Officer of Guy Carpenter and President of Guy Carpenter Julio A. Portalatin - Chief Executive Officer of Mercer and President of Mercer Peter Zaffino - Chief Executive Officer of Marsh Inc and President of Marsh Inc Scott McDonald - President

Elyse Greenspan - Wells Fargo Securities, LLC, Research Division Jay Gelb - Barclays Capital, Research Division Michael Steven Nannizzi - Goldman Sachs Group Inc., Research Division Kai Pan - Morgan Stanley, Research Division Larry Greenberg - Janney Montgomery Scott LLC, Research Division Dan Farrell - Sterne Agee & Leach Inc., Research Division Joshua D. Shanker - Deutsche Bank AG, Research Division Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division Vinay Misquith - Evercore Partners Inc., Research Division Charles Sebaski Brian Meredith - UBS Investment Bank, Research Division Clifford H. Gallant - Nomura Securities Co. Ltd., Research Division

Welcome to Marsh & McLennan Companies Conference Call. Today's call is being recorded. Second quarter 2014 financial results and supplemental information were issued earlier this morning. They are available on the company's website at www.mmc.com. Before we begin, I would like to remind you the 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, and a variety of factors may cause actual results to differ materially from those contemplated by the forward-looking statements. Please refer to the company's most recent SEC filings, 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 over to Dan Glaser, President and CEO of Marsh & McLennan Companies.

Thank you, Jamie. Good morning, and thank you for joining us to discuss our second quarter results reported earlier today. I'm Dan Glaser, President and CEO of MMC. Joining me on the call today is Mike Bischoff, our CFO. I'd also like to welcome our operating companies' CEOs: Peter Zaffino, Alex Moczarski, Julio Portalatin and Scott McDonald. Also with us this morning is Keith Walsh. MMC continued to deliver excellent financial results in the second quarter. We produced strong revenue growth, meaningful margin improvement and double-digit growth in operating income. We also returned capital to shareholders through increased share repurchase and announced a 12% increase in our quarterly dividend. MMC's revenue growth was 7%, with all operating companies contributing. This level of growth was achieved both organically and through our strategy of executing on quality acquisitions. Revenue grew 5% on an underlying basis. This growth exceeded the increase in underlying operating expenses as it has for 15 consecutive quarters, driving our consolidated adjusted margin of 60 basis points to 19.8%, our highest second quarter in a decade. Adjusted operating income rose 11%. This is the fourth straight year that we increased second quarter earnings by double digits. Looking at our Risk and Insurance Services segment, revenue increased 6% to $1.8 billion or 4% on an underlying basis. Adjusted operating income increased 5% to $454 million. The second quarter margin declined slightly to 25.4%. But more importantly, during the first half of the year, the margin increased 20 basis points to 26.3%. For the full year, Risk and Insurance Services remains on track to produce solid underlying revenue growth and meaningful earnings growth as well as deliver slight margin improvement driven by Marsh. Marsh's revenue increased 7% to $1.5 billion or 4% on an underlying basis. All major geographic regions contributed…

Thank you, Dan, and good morning, everyone. In the second quarter, revenue increased 7% to $3.3 billion or 5% on an underlying basis. Adjusted operating income grew 11% to $656 million, the highest level of second quarter profitability in our history. The consolidated adjusted margin rose from 19.2% to 19.8%. GAAP EPS increased 12% to $0.77, and adjusted EPS increased 10% to $0.79. As we highlighted on last quarter's call, we anticipated that this quarter would be impacted by a meaningful reduction in investment income and, within the Risk and Insurance Services segment, the impact of planned expense growth and the negative effects of foreign exchange. The adverse FX impact was slightly less than the $0.02 we have projected since several major currencies strengthened against the U.S. dollar. In the third quarter, we expect foreign exchange to impact Risk and Insurance Services by the same magnitude as this quarter. Investment income. We had an investment loss of $2 million this quarter compared with investment income of $23 million in the prior year, a reduction of $0.03 per share on a year-over-year basis. For modeling purposes, we'd like you to note that any investment income from Trident III that may occur in the last half of this year will most likely be offset by corporate initiatives. As you may recall, income from Trident III only represents our general partner carried interest. And the timing of this we do not control. In the second quarter, MMC issued $600 million of 3.5% 10-year senior notes. This allowed us to fund the July debt maturity of $320 million. By refinancing at attractive interest rates, the average cost of our debt has declined 60 basis points over the past year. Taxes. Our effective tax rate was 27.6% in the second quarter. As you know, the…

Thank you, Mike. Jamie, we're ready to begin Q&A.

[Operator Instructions] And we'll take our first question from Elyse Greenspan with Wells Fargo.

I was hoping that we could spend more time talking about what you are seeing at Guy Carpenter. I mean, the growth did stand out in the quarter, especially in light of the market commentary that we're hearing in terms of prices down double digits. If you can comment on what you saw price-wise during the recent June and July renewals. And also, your expectations for the balance of the year, if you expect that you can kind of sustain that 2% growth level? Or what we might see in the back half of the year?

Okay. So thank you, Elyse. It's Dan here, and I'll just kick off some commentary on the market in general. I think it's important to know that everyone I have sitting around this table is a seasoned hand in the risk and insurance services space. And from that perspective, we operate over many, many years in all kinds of markets. And usually, the risk and insurance services market, for one reason or another, is usually softer, softening, and so we're quite used to the idea that the market is competitive and that there's downward pressure on rates. And so Guy Carpenter has done a good job anticipating the future, really starting many quarters ago. And so, Alex, do you want to dig in a little deeper?

Sure. Thank you very much. So yes, echoing what Dan has said, we've been -- it's now 5.5 years where we haven't gone backwards in any quarter. So 22 quarters without going backwards, which I think is a testament to the strength of the management and the people that we have within the company and our relationships with our clients. And as we've said in Investor Day, we've continued to look at bringing new products, new services into our portfolio. And we've also executed on segmentation, which we talked about. So we're widening our net. We have many more smaller clients than we had before. We've invested in people. We've actually increased our headcount probably around 140 people over the last year or so. Many of those are what we call strategic hires that relate to bringing in new business. Others are based on bringing in new services around our strategic advisory. Others are related to acquisitions that we've made in what we consider to be growth areas, like Accident and Health and Agriculture. And then finally, we have been able to bring in some very good people to look after the increased client base that we have because we have many more clients. So yes, rates have been coming down. But it's interesting because some companies have found that the contingent capital is very interesting. They're actually changing that strategy around buying reinsurance. Others are using some of their budget now to buy casualty reinsurance. So it's not a tale of woe, it's just -- it's around execution. It's around client relationships. It's around leaning forward. It's around investing. And I think we'll be able to show modest growth, mild growth for the rest of the year.

Thank you, Alex. So Elyse, just to summarize that, it's -- it won't be a banner top line year for Guy Carpenter, but we do expect to see growth over the entire year.

Okay. And then one other, in terms of RIS just looking at the overall margins, you guys did say about modest margin improvement for the full year. I think you used the word slight in your prepared remarks.

Yes.

Now has that changed from where you were sitting last quarter? I know you guys pointed to some negative impacts from foreign exchange, as well as the expense growth in the second quarter. But when you're looking at the back half of the year, has your expectations changed? Or is that kind of similar to where we were sitting a few months ago?

It's very similar to where we were a few months ago. So nothing's really changed on that front. I mean, let me just address RIS margins in general because our view is we will continue to expand margins over time, while we invest for future growth. The level of margin improvement is going to move around and vary a bit based upon where the top line is and the pace of our investments, which can be lumpy from time to time. This year, in particular, we expect good revenue and good earnings growth in RIS but slight margin expansion for the year.

And I would just add on our foreign exchange modeling. Obviously, the currencies can move dramatically across the dollar. But from the beginning of the year, we essentially gave guidance, and then we updated that guidance in the first quarter earnings call. It really did not change. And as I just indicated, our current modeling, despite marked movements in the euro and the pound, still indicates that the second and third quarters will feel the most negative impact for RIS. And in fact, every quarter, RIS, most likely, will feel foreign exchange negative impacts. So our view on the impact of foreign exchange has not changed. I would also point out that the -- just seasonally, the third quarter is the smallest for RIS, so foreign exchange may impact it slightly more in the third quarter vis-à-vis the second. But just to reiterate what Dan said, no, our view has not changed at all.

And we'll take our next question from Jay Gelb with Barclays.

Dan, if I recall correctly, last quarter and the Investor Day, you have reiterated that you have more of a focus on profit growth in Risk and Insurance Services than margin expansion. I just want to see if that's still the case.

That's absolutely right. I mean, when I -- to be frank, I don't spend 5 minutes worrying about our margins or our ability to expand margins in the future. And when I look at our raw absolute margins in RIS, even though they were down 20 bps, they were up 170 bps in the second quarter of 2013, and they're up 20 bps through the 6 months this year. And then when I look at just the absolute amount, 25.4% through 6 months, in my mind, is very competitive in the marketplace. And so it's really about how do we take this terrific business and grow it faster both on the top line and on earnings while maintaining and improving our margins over time.

All right. That's helpful. And then on Guy Carpenter, unlike one of your major competitors that saw a pullback in organic growth in reinsurance brokerage, Guy Carpenter actually accelerated versus the first quarter. It will be helpful to get some color on that maybe from Alex. Was that account wins? Was that some other factor that helped drive growth to a better level?

Yes, we had very good new business. And that's -- again, that's part of 2 things, really. It's the segmentation strategy, it's focusing to get the right products to the right type of clients and going into areas where we -- perhaps, we had some business, but we didn't realize how strong it was, and so we've created a segment around it, and we've focused people on it. That's been very effective. And our retention has been good as far as clients. We haven't lost -- no, I don't -- I could name maybe one that we've lost in the last quarter. So all in all, good retention, good new business and selling new product.

And then I think it's important to reiterate, Jay, what Alex had said earlier as well, that even though this is a slow growth environment for Guy Carpenter, we believe Guy Carpenter is absolutely one of the jewels in our crown. And we are continuing to invest. Guy Carpenter, over the last several years, it's been our fastest grower, they're competitive in the market, they've got a great leadership team, and in many ways, they've become the employer of choice. And so from our basis, we're continuing to grow the top line. The numbers that -- the headcount, the numbers that Alex had referred to earlier in the call when he was talking about more than 100 different hires, that represents 6% or so of Guy Carpenter's headcount. So you can see, in the last 12 months, we've made a bet on Guy Carpenter and the reissuance business in general.

And we'll take the next question from Michael Nannizzi with Goldman Sachs.

I guess just one question. You mentioned revenue growth outpacing expense growth overall. Can we talk -- drill down maybe a bit into the Risk segment, where it looks like maybe that hasn't been the case here. Recently, I know you mentioned some expense initiatives. We'd love to sort of understand those and just sort of get an idea of what's happening to natural margins, excluding these types of initiatives. And if those are still on pace to deliver the same type of performance that you sort of talked about across the whole book.

Sure. I mean, in the RIS segment, when I look over the last, really, 5 years or even slightly longer, virtually, in every quarter, revenue growth for RIS exceeds expense growth. That's a discipline of the company. It's a philosophy of the entire firm, and it's how we operate the business. And so it is not that we intend for that to reverse. Sure, there may be the odd quarter here or there where we get upside down. But believe me, we won't stay upside down. Now if I look on the expense side for the whole company, including RIS, we've been operating in a managed expense environment all the way through the financial crisis and its aftermath. And so if you look at the last 8 quarters, our expense growth this quarter at 3%, it's actually the highest expense growth we've had in the last 8 quarters. But certainly, 3% is not a worrying trend to us from that standpoint. And we expect RIS to continue to invest as they see necessary in order to generate future growth.

Got it. Okay. And then on the Consulting side, would it be possible to understand what sort of happened to Mercer margins year-over-year and what happened to Oliver Wyman, where -- can we -- should we make the assumption that in each of those subsegments that margins were flat? It's just a larger share of the total pie that Oliver Wyman earned this year?

I mean, I would look at a couple of things on this basis. First of all, the margins are far from flat in our Consulting segment. I mean, the overall segment was up 160 basis points in the quarter, and that's on top of 120 basis points in the second quarter of last year. The 16.2% margin in the quarter, the highest quarter that we've had in our recognition but certainly over the last 20 years. So there's been tremendous margin expansion in the Consulting segment not only last year, but we've got growth-on-growth this year. And both -- Oliver Wyman, we don't break out our margins by operating company because it is a Consulting segment, but I can say, Oliver Wyman and Mercer have both contributed to the margin expansion within Consulting.

Great. And then just lastly, on the tax rate. It looks like it declined a bit year-over-year. Maybe some thoughts on that. And generally, like how do you think about taxes relative to your peers? And is that something that you want to address or where that you feel like you're comfortable where you are?

Well, Mike, do you want to take that?

Yes, I'd be more than happy to. And Jay, you're absolutely correct. Tax is a fairly complex topic. With regard to our peers, I won't comment too much on that. Obviously, we have peers that we're competing against that have a tax rate higher than we do, and we have peers that have a tax rate lower than we do. So we really do focus on what we can do and how we can manage it. I would say one thing is different than when we reported it in the second half of last -- in the second quarter of last year. In the second quarter of last year, we had given guidance to the investment community that our tax rate would be about 30% for the entire year. And over the course of the first 6 months, the tax rate was trending slightly lower than that. And we still said that it should be about 30% for the entire year. It's different this year. It's different this year in that we did have some discrete items. I did mention the larger one, which is that we completed the open year of 2012 with regard to our federal return with the IRS. And so our tax rate for the first half of the year was below the 30%. But as you could hear in my prepared remarks, we don't think we'll give any of that back. And so we're hopeful that our tax rate over the last 6 months would be 30%. So our effective tax rate will be 29.5%. That's the -- for the year. And that's the lowest that we've seen in many years, so we're encouraged by that.

And we'll go next to Kai Pan with Morgan Stanley.

So first question is on buybacks. It looks like you -- today, you said you're going to a capital management plan for this year $2.1 billion, including $800 million acquisitions; $600 million for dividends. About -- that leave about $700 million for buybacks. You did $400 million, so just in the first half. So I just wonder, is that math indicate that in the second half you're going to slow down? And also related to your cash balance in the U.S., $340 million, will that be the limiting factor how much you can -- how quickly you can buy back your shares?

Excuse me, this is Mike Bischoff. I just want to get the math correct. We did $350 million of share repurchase in the first 6 months. We did $100 million in the first quarter and $250 million in the second quarter.

I'm sorry. My bad. My math is bad.

Sure.

So basically, you're looking for about the same pace then in the second half?

Well, yes. I mean, but -- and the thing is what we outlined on Investor Day in terms of that $2.1 billion and sort of the, let's say, the hold we had with regard to our expectations around acquisitions, leaving $1.3 billion or so available for dividends and share repurchase, that's as good a number as any for you to use right now. I mean, it certainly, in our expectation, won't be less than that amount.

Yes. Just to add clarity to that so there's no ambiguity. We are fairly clear on Investor Day. We were indicating that return of capital to shareholders would be about $1.3 billion. That would be comprised of dividends and share repurchase. Tracking through the first 6 months, dividends were $275 million, and shares, as I mentioned, were $350 million. You're absolutely right that Dan, in -- at Investor Day, indicated that we had kind of allocated in our own thinking about $800 million for acquisitions over the course of the year. Nice to report that our pipeline has been very robust. Our acquisitions through the first 6 months were $439 million. With the investment that you just heard us describe in Alexander Forbes, that's another $312 million. So we're roughly $750 million already against that $800 million that Dan articulated in Investor Day. So in every category, we're not only tracking but feel very good with regard to what we articulated at Investor Day.

And thanks, Kai, because it really is a good question. And like we said at Investor Day, even if we go over our placeholder of $800 million, we don't expect that, that would impact the $1.3 billion that we're thinking about in terms of share repurchase and dividend.

Great. Then secondly, can you give update on the private health exchange and what the pipeline looks like, and especially going into the second half, probably the peak of the enrollment season?

Sure. Julio, do you want to take that?

Thanks, Dan, and thanks, Kai for the question. Last time, we updated the numbers at Investor Day. We said around 300,000 lives or so spread across about 80 clients. And we have -- that included both the active and the retiree space. Our sales process continues very aggressively. Our pipeline is very, very strong. The selling season is at its height. And we continue to have clients who are choosing the platform, and they will sign up as of the first of the year 2015 and then throughout the year as well because, as you know, we have a lot of middle-market clients that have different enrollment dates. So it's great to be able to pace that throughout the year. And as we said in the last call, we plan on updating sales activity in lives as we get through the third quarter and early fourth quarter. And it's going to be, I think, a very good outcome for us. The -- I can say the activity has been stronger. We're very, very pleased. We think it's best to give that update towards the end of the year, when the full picture is well known, and the sales season is complete. But I have to tell you, the level of dialogue we're having with our clients and prospects around these changes is very high, and we're just very pleased with how it's going. And stay tuned for the announcements, I guess, later on.

And we'll take our next question from Larry Greenberg with Janney Capital.

Just to nitpick a little bit more on margins, you mentioned FX about the same in 3Q as 2Q. When we think about expense comparisons in the third and fourth quarters, I mean, is there any unevenness to those quarters in comparison with the year ago?

No, I think what Mike was alluding to is, particularly in RIS, the third quarter is our smallest revenue quarter. And so expenses, some of which are straight line throughout the year, tend to look a little bit higher. We always have our lowest margins in the third quarter, and that's been the case for many, many years. And so that -- but there's nothing that is anticipated which is changing the trajectory. And as Mike mentioned earlier, we're expecting a better second half of the year from an earnings growth standpoint.

Right. Good. That's helpful. And then can you just elaborate a little bit more on the acquisitions that you've made, including Alexander Forbes? And just what that brings to you guys either strategically or geographically?

Okay. So I'll take that to start with, Larry, and then I'll hand off to Peter in the first instance to talk about some of Marsh & McLennan Agency because that's really been a focus for us over the last number of years in terms of acquisition strategy and philosophy. And then we'll hand over to Julio, who will specifically talk about Alexander Forbes and how thrilled we are to be the anchor investor on their recent IPO. Let me just say, just to begin with and reiterating some of the thoughts that we had on Investor Day, acquisitions have really been a core part of our strategy and philosophy over many years. We developed relationships over a long period of time. And frankly, when we do acquisitions, more times than not, it's both sides thinking, hey, we'll be better together than we are apart, so why don't we get together? I mean, our focus is certainly on the 4 pillars that we always outlined to you, but also talent, quality, cultural fit, economics. And we generally prefer companies that are growing faster than we are or trading below our multiple or where we see the business and we believe we can improve the business and improve its margins. So Peter, do you want to talk a little bit about MMA?

Sure, Dan. Thanks. Well, MMA is a very consistent story, continues to drive organic growth. We've done 39 acquisitions since 2009, and our annualized revenue is closing in at around $650 million. We did 3 acquisitions in the second quarter. Dan mentioned in his opening comments one in North Carolina, the largest independent agency, Senn Dunn, which has a real balanced property and casualty employee benefits portfolio mix. And it's really becoming a core differentiator for us in the United States. If I could add one thing before handing it over to Julio is that the Alexander Forbes insurance acquisition has proven to be incredibly valuable for Marsh, giving us a footprint in sub-Sahara Africa. It's been a strong contributor in connecting our multinational clients, and so that has been a real differentiation for Marsh. And it's contributing to organic growth in the EMEA region.

Yes, so we've really been quite active in Marsh, not only in MMA but also Africa, Panama, Peru, Dominican Republic. Julio, do you want to talk about Alexander Forbes?

Thanks, Dan and Peter. For quite some time now, we've been articulating a strategy to want to become much more significant in the growth market economies around the world, and this is obviously a further step in that direction. Through this investment, we gain great exposure to a great management team, great clients and a fantastic footprint in a geography that's going to be growing certainly over the next decade. And Mercer will have a role on Alexander Forbes Board of Directors. We will contribute strategic expertise in a global perspective. We'll be supportive to African clients who want to become global outside of Africa, as well as our clients will have the benefit of a great structure inside of South Africa and sub-Sahara Africa when they're expanding into Africa. We believe that the transaction offers just some real significant value to both the client base of both sides of the transaction and also the employees and opportunities for the future. We're really pleased with this transaction. I couldn't be more excited about it, and we're looking forward to maximizing it's value as time goes on.

Thanks, Julio. Does that cover it, Larry?

Yes, it's helpful.

And we'll go next to Dan Farrell with Sterne Agee. Dan Farrell - Sterne Agee & Leach Inc., Research Division: Just a question on your international cash. Does your 30% tax rate for the balance of the year include any plans for movement of international cash over to the U.S. holding company?

Mike?

Yes, very good question. I think we generally indicated that we have about $1.4 billion of international cash going into the year dedicated on a permanently invested basis. And you can see with regard to Alexander Forbes, that's one way that we plan to utilize international cash. With regard to the U.S., yes, we do have repatriation strategies. We look at it over multiple years. As you know, the main driver of need for cash in the U.S. is for share repurchase and dividends, in addition to funding the acquisitions in the U.S., predominantly MMA. And then specifically to your question, which is does the 30% tax rate guidance for the last 6 months and 29.5% for the entire year include the repatriation of funds that we need from our international operations into the U.S. for these purposes that I just mentioned? And the answer is yes, it does. Dan Farrell - Sterne Agee & Leach Inc., Research Division: Okay. And then also just a question on some of the investments that you're making in the business. Your capital expenditure has been running higher than a lot of your peers, and I was wondering if you could just maybe expand a little bit on some of the things that you're doing. And are these investments targeted towards more operational efficiency, growth efforts? Maybe just some color around them would be helpful.

Well, if you say operational efficiencies, growth and reducing risk, you would have had the trifecta. So well done, Dan. The main drivers are those 3 areas, so initiatives to improve growth, to drive efficiency and reduce risk. Mike, do you want to add some color to that?

Yes, I -- once again, I won't mention our rate of CapEx compared to competitors because they may have their own needs. But with regard to us, our CapEx spending did increase fairly significantly from the levels of '09, 2010 and building up to where it was in 2013 and 2014, tracking at about $400 million. And like I've said, about 2/3 of that is in technology for, really, IT upgrades. There's finance transformation. We have new fiduciary revenue and billing systems not only in the U.S. but introducing that in the U.K. We have data centers and client analytics. And so we really have been spending over the last several years to make MMC even stronger and more efficient with expanded client and colleague capabilities. The other roughly 30% is, as I mentioned, reducing our global real estate footprint, more efficiency, collocations, cost savings and also putting in the smart office concepts for our colleagues.

And we'll go next to Josh Shanker with Deutsche Bank.

Given the growth at Oliver Wyman, has the business become seasonal in terms of revenues? And does that have any impact on exacerbating seasonality in Consulting margins?

Yes, no, it's an interesting question. I would approach it in a couple of different ways, and then I'll hand off to Scott to give a little bit more flavor to it. First, if you look at our overall business between Risk and Insurance Services and Consulting, it's reasonably well balanced. And so from that standpoint, you don't see large seasonal shifts as we go throughout the year on the Consulting side. And as we mentioned earlier, on the RIS side, you tend to see a seasonal dip in revenue in the third quarter, and the other 3 quarters for RIS are reasonably similar to each other. You also have to bear in mind that when we look at the RIS segment, Guy Carpenter is much smaller than Marsh. And when you look at the Consulting segment, Oliver Wyman is much smaller than Mercer. And so even though Oliver Wyman may be growing much faster for a period of time, its impact on the overall numbers for -- particularly on earnings for the Consulting segment is muted just because of its size relative to Mercer. But Scott, do you want to talk about potential seasonality?

Sure. I don't think, Josh, that the seasonality has changed. In management consulting, typically, we see slower months in July and August and then in December and January as there's lower client activity in that. That's been that way for many years and hasn't changed. Specifically, the growth we're seeing now, I think, is driven by -- not by seasonality but by 3 things. The first is we had a pretty weak 2013, and so our comparison to that is excellent. It will get harder through the second half of the year as our second half of the year was better last year. The economic environment has been supportive of corporate confidence, and they've been spending money on Consulting. So that has been helpful for us. And we've made a lot of changes at Oliver Wyman over the last 18 months or 2 years around the organization and approach to market. I think we've made it a better firm, and we're being more successful in the market and that should continue. So I'd expect we'll still see strong continued growth. The seasonality won't be different than the past, but the current growth rates in the high teens are unsustainable, we think.

And so when you say moderating growth -- I mean, I know you don't give specific guidance, but maybe I'm looking for a little bit. Does moderate mean high single digits? Or does that mean in line with the rest of Consulting?

I would say -- and it's Dan here, speaking for Scott. I would say moderating growth means to the mid- to high single digits at least in my business plan and, hopefully, in Scott's.

And we'll go next to Meyer Shields with KBW. Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Going back to Guy Carpenter, is there any dislocation in the reinsurance brokerage arena where maybe more clients than you would've expected are open to the idea of switching brokers?

I'll take that to start with, and then hand over to Alex. I mean, the client retention levels in reinsurance broking in general, and certainly Guy Carpenter specifically, are extremely high and would be the envy of all of our other Opcos. I mean, the -- so the switching that you might see more often on the retail side in either consumer businesses, retail businesses is not prevalent on the reinsurance side. So this is -- so when companies switch, it's usually a multi-year relationship development. And Guy Carpenter is showing its innovative skills in creating a relationship of trust and then a movement happens. It's not a price-spaced or a point-in-time type of shift. But Alex, do you have something else to add to that?

I would say I'd echo again what you said. I'd maybe say that there's been changes in the brokerage structure within the marketplace, okay, and that's brought some changes. The other thing -- the other reason why we might get a -- lose a piece of business -- but actually, we haven't been losing -- but when a piece of business is because there's a change in management in one of the insurance companies or change in ownership. And there's been some of that going on. So -- but I don't see any major change or shift in the landscape that you might be questioning.

So we have seen no secular dislocation, Meyer. Any other questions? Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division: Yes, just one quick one. Once you've acquired the 34% stake in Alexander Forbes, where does that impact the income statement? Is that investment income?

Mike, do you want to take that?

Yes. No, actually, it will be the equity method of accounting. So it will be the earnings of Alexander Forbes. And then our proportional share, which will be 34% when we complete the tranche in this quarter. And then it will be tax affected. And then it will be added to the revenue each quarter for Mercer.

And we'll take our next question from Vinay Misquith with Evercore.

The first question is on the Risk and Insurance segment. I believe you said margin expansion will be modest this year, and this was, in large part, due to the foreign exchange. Just curious, on a more normalized basis, how much of margin expansion do you expect in that segment?

Yes. I mean, I'm not setting a margin target for the RIS segment over time. I would say that we expect our revenues in RIS to generally be exceeding our expenses in RIS as we march forward. I would also say that the margin levels in RIS are very competitive in the market, and they may actually be market leading at this stage. So our view is to focus our attention, as we mentioned at Investor Day, in growing top line revenue and also growing our earnings in this high-margin business as opposed to overly focusing on margins. Margins will -- margin expansion will be an outcome rather than a driver of our activity. Any other question?

Yes. Just in the Consulting segment, you've shown very strong margins first half of this year. Should we see a small slowdown in the pace of margin improvement in the second half?

I mean, the Consulting margins have been rocketing forward over the last 2.5 years. And really, that's down to the leadership team and everyone getting behind the idea of running the business more like an overall advisory and transactional firm and less like a pure consulting firm. And so they -- we've made tremendous strides in running the business from that standpoint. We -- when we look forward over not only the back half of the year but in the future, we believe both of our segments have the ability to grow their margins. And so that is a focus of the company a little bit more so these days in Consulting than in RIS. But overall, I would say, for both segments, the primary interest of ours is growing organic revenue, followed by growing earnings and margin expansion as an outcome of us growing our revenue at a faster pace than growing our expenses.

And we'll go next to Charles Sebaski with BMO Capital Markets.

Was curious about growth at Marsh, and I wonder if we could get any color on contribution to organic growth from Marsh Agency. I know the comment about $650 million in revenue, but as that sort of earns in and becomes organic over time, can we get some thought on how that's helping versus the traditional Marsh business?

Sure. Sure. Well, I'll just start by saying if you look at the RIS segment in total, we've had 17 consecutive quarters of 3% organic growth or better. So we're quite pleased with our growth in this tough market environment of our RIS segment. And Marsh, specifically, has had 4% growth 3 quarters in a row. So Peter and his team are doing a phenomenal job in developing organic growth in a very big company. And so Peter, do you want to give us more color?

Sure. If I -- thanks, Dan. If I start with MMA, we look at some of the peer companies outside of the organization for middle market business, and they are performing at or above what we expect on organic growth. I mean, the U.S. and Canada division has multiple businesses in it, and therefore, it is a big contributor. But we also have the core U.S. business for brokerage. We have Canada. We have an MGA, a private client. We have a program business. We have a technology business in STARS. And they all contributed, perhaps, not all in the same quarter, but MMA has been a really steady contributor. We have been investing for organic growth as we outlined at Investor Day. And as we continue to expand our footprint, we feel we have more balance for that growth.

Okay. I guess on another segment, saw some commentary that there's been a change in U.K. pensions, and curious if this is a U.K.-specific or company-wide and what the potential effect on expenses are on making a pension change away from a defined benefit.

Okay. So a couple of things. One, the U.K. plans both have assets and liabilities above GBP 4 billion, which makes them the largest within MMC. Our goal in the U.K. -- and you're right that we recently made a change. Actually, it's effective, I believe, August 1. But we recently decided upon a change, in consultation with our colleagues in the U.K., to move from a defined benefit plan to close it and freeze it and move to a DC plan. And our goal in the U.K. was not to achieve cost savings. So let me just tell you that right off the bat. Our objective was to create a DC plan, which is highly competitive in the market, consistent and fair to all colleagues and which reduce risk over time for MMC. And we believe we've achieved that. Now in terms of other plans, we periodically review our plans to assess market competitiveness, consistency across MMC, risk, costs, all of those things. But right now, we have no current plans to amend any of our other DB plans at this point in time.

And there isn't -- in terms of when you say reducing the risk, and I'm assuming the volatility, but that doesn't -- I mean, that doesn't equate into a cost save? I mean, I realize that the plan of it is to limit volatility, but that volatility would seem that it would be a volatility up, right, that's in the long term, maybe not next couple -- next quarter or 2, but the next couple of years should be some inherent cost savings, no?

The -- any savings on large DB plans are driven more by interest rate movements and discount rate movements, a little bit of asset returns, that sort of thing as opposed to whether you're a DB or DC. The cost to the company for providing the benefit is actually quite similar. And we did have benefits in terms of mitigating -- essentially closing the DB plan and freezing it. We did receive a curtailment gain, which we cycled back largely to the colleague base in the U.K. in terms of mitigating the impact on some of our colleagues. So there's really no material financial impact based upon that change.

And we'll go next to Brian Meredith with UBS.

Yes. Just a couple of quick ones here. The first one, Mike, just a clarification on your comment with respect to the Trident III. Did you say that it's going to be offset, largely, any income by additional corporate initiatives?

That's correct.

So we should expect just kind of breakeven for the investment gains for the remainder of the year?

I think for modeling purposes, Brian, that makes a lot of sense.

Okay. And then one other quick one for you, Mike. I noticed you guys raised $600 million, paying down $320 million, so you're going to have a little more debt on the balance sheet. Is there any kind of conscious initiative to maybe increase leverage here a little bit going forward?

I think in general -- and I'll start off and then hand to Mike to add a little bit more color. I think our objective over time, and we talked a little bit about this at Investor Day, is to, over time, reduce cash on the balance sheet to the extent that's practical. Over time, to raise our level of debt as well still as a conservatively run company. But overall, our ability to handle more debt is certainly prevalent and interest rates are pretty low. We have a balanced approach. And so I think you're going to see both of those factors as we move forward over the next several quarters and a couple of years. But Mike, do you want to add to that?

No, Dan. I think that's well said. It's a balance. We're improving and have improved our credit metrics, but we can continue to improve our credit metrics even with this steadily -- well, not steadily but beginning to expand the overall debt on our balance sheet. And that's, obviously, only one issue of leverage. It has to do with the pension obligations, present value of our operating leases, and we've worked very diligently on those areas as well. So as Dan said, it's a balance.

So that final question comes from Cliff Gallant with Nomura.

I just want -- I was hoping you could talk a little bit more about some of the comments you made earlier about the underwriting environment and the cycle, particularly on the insurance side. I believe a few quarters ago, there was a comment made on your call that reinsurance pricing weakness was -- historically, has always led to a weakness on the primary side, and I'm curious as to what degree do you think things are different this time? Are things meeting your expectations? Has been there more or less disciplined among the insurance companies?

It's Dan here. We don't think things will be different this time. We think, fundamentally, that as reinsurance prices reduce, it gives more flexibility for primary carriers to adjust their strategies and figure out other ways to grow their business. And some of that may be giving up some of the gains that they've obtained on their own reinsurance programs. But Peter, do you want to talk about what's happening in the retail?

Sure. I think when we talk about reinsurance, it's been primarily driven by property cat and property declines. When we look at our overall portfolio, we're in so many different countries across the world, that they all tend to have different dynamics based on mix of business, based on geographical footprint. But if I was to comment and see what's happening on pricing on the primary side, we have seen more reductions; nothing dramatic, but a modest reduction continuing in the second quarter. If I look at some of the regions, Latin America probably had pricing falling off the most but it's still low to mid-single digits. Line of business was really driven by property. Having said that, we're cautiously optimistic that we're seeing more exposure increase on the overall book of business. And so looking at total insured values, payroll in the U.S., sales across the world has been a modest offset to some of the modest price declines.

Thanks, Peter. And I think that about does it for the call. So I'd like to thank you all for joining us on the call this morning. I'd also like to thank our clients for their support and our colleagues for their hard work and dedication in serving them. Have a good day.

And again, that does conclude today's conference. We do thank everyone for your participation.