Marsh & McLennan Companies, Inc. (MRSH) Q3 2015 Earnings Report, Transcript and Summary

Welcome to Marsh & McLennan Companies' conference call. Today's call is being recorded. Third quarter 2015 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 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 risk 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 over the conference to Dan Glaser, President and CEO of Marsh & McLennan Companies. Daniel S. Glaser - President, Chief Executive Officer & Director: Good morning and thank you for joining us to discuss our third quarter results. I'm Dan Glaser, President and CEO of Marsh & McLennan Companies. Joining me on the call today is Mike Bischoff, our CFO; and our operating companies' CEOs: Peter Zaffino of Marsh; Alex Moczarski of Guy Carpenter; Julio Portalatin of Mercer; and Scott McDonald of Oliver Wyman. Also with us is Keith Walsh of Investor Relations. I am pleased with our results for both the third quarter and nine months. Over these periods, we produced underlying revenue growth across all operating companies, along with higher adjusted operating income and margin expansion in both segments. For the nine months, adjusted EPS rose 8%. We continue to execute and grow in a challenging macro environment. As a global growth company, we are not immune to the effects of modest global GDP growth, low interest rates, a strong U.S. dollar or the slowdown in emerging economies. Despite this environment, we are on track for 2015 to be the sixth consecutive year that we have generated underlying revenue growth of at least 3%. We have several attributes which make us optimistic about our ability to generate good, long-term revenue growth. We have a vast geographic footprint in all of our businesses, especially RIS. This gives us the balance to benefit from varying levels of global growth. In most years, global premiums tend to rise despite negative pricing trends. In addition, we view risk as a growth business. Increasing exposures from new emerging risk, globalization and economic uncertainty create volatility and disruption. Our clients' need for advice and services is only rising. We are able to meet these needs through the quality and depth of our colleague base and our collaborative and cohesive culture. This underpins our consistent long-term revenue growth, both organic and acquired at RIS. In addition, we are well positioned to benefit from favorable long term global trends in consulting. At Mercer, the need for advice around issues of health, wealth and career are increasing. Mercer is a trusted advisor, serving clients and their more than 110 million employees in over 100 countries. Oliver Wyman provides deep industry knowledge and strategic expertise to their clients around issues of growth, change and efficiency. We also use capital management to drive growth. Through nine months, we have already exceeded the $2.3 billion of capital deployed for acquisitions, dividends and buybacks for all of 2014. The primary sources of this capital have been increasing levels of operating cash flow and using our balance sheet. In 2015, we raised $1.1 billion of incremental debt and we continue to work down cash balances. While capital utilization has been substantial, we have maintained balance sheet flexibility, which we believe is prudent. We manage for the long-term and reinvestment is a constant. We invest through cycles and preserve our ability to take advantage of periods of dislocation to invest in our colleagues and capabilities, add to our talent base, and make acquisitions. This balanced strategy has served us well as evidenced by our ability to deliver in a variety of market environments. Now let's turn to our results. In the third quarter, we produced underlying revenue growth of 4%, 6% growth in adjusted operating income, a 100 basis point rise in our adjusted operating margin to 15.6%, our highest third-quarter margin in more than a decade, and 13% growth in adjusted EPS. Through nine months, underlying revenue rose 3%, adjusted operating income was up 5%, the margin expanded 120 basis points, and adjusted EPS increased 8%. For Risk and Insurance Services, revenue in the third quarter was $1.6 billion, with underlying growth of 2%, adjusted operating income grew 3%, and the margin increased 70 basis points to 15.7%. Through nine months, underlying revenue growth was 2%, adjusted operating income rose 4% to $1.2 billion, and the margin increased 130 basis points to 24.1%, the highest in over a decade. This margin improvement continues a march we have been on since 2007, when adjusted margins in the RIS segment were at their lowest. At Marsh, revenue in the third quarter was $1.3 billion, with underlying growth of 2%. The U.S./Canada division grew 2%, led by Marsh and McLennan Agency. The MMA strategy has been very successful. Since 2009, MMA has made approximately 50 acquisitions with annualized revenues approaching $900 million. In our International division, the increase was also 2%, reflecting modest growth in EMEA and Asia-Pacific, and a 6% increase in Latin America. In September, Marsh announced its intention to acquire U.K.-based insurance broker, Jelf Group. This aligns with Marsh's strategy to expand globally in the SME space. We expect the transaction to close within the next several months. With the recent acquisition of Dovetail, Marsh continues to broaden its services in the small commercial segment. Dovetail's flexible and scalable technology offers agents access to online real-time quoting and binding from multiple insurance providers. Through nine months, Marsh's underlying revenue was up 3%, reflecting growth of 3% in U.S./Canada and 2% in the International division. Guy Carpenter's revenue was $261 million in the third quarter, an increase of 2% on an underlying basis and 1% through nine months. This was a reasonable result considering the significant rate reductions in many lines. The U.S. and EMEA were areas of strength driven by strong retention rates and new business wins in treaty. Moving to Consulting, revenue was $1.5 billion in the third quarter, reflecting strong underlying growth of 6%. Adjusted operating income increased 4% to $285 million. The adjusted operating margin expanded 70 basis points to 18.5%, the 15th consecutive quarterly increase. Similar to RIS, consulting has a record of achieving higher adjusted operating margins in recent years. The improvement has been at least 150 basis points in each of the past three years, and with additional expansion so far in 2015, the third quarter margin was the highest in over 30 years. Through nine months, underlying revenue growth was 5%, adjusted operating income increased 4% and the margin expanded 90 basis points to 17.5%. Mercer's revenue was $1.1 billion in the third quarter, reflecting an underlying increase of 5%. Revenue growth was achieved across all three of Mercer's major geographies – North America, Euro-Pac and growth markets. Mercer's growth was broad-based with investments, talent and health each growing 6%. Retirement rose 2%. Investments continued its long-term positive performance. AUM increased to $138 billion as new client assets more than offset market and FX pressure. Talent once again performed well. It generated its fourth consecutive quarter of growth driven by its seasonally strong survey business and increased demand for project consultancy work. Mercer recently announced a strategic alliance with Transamerica, which will acquire Mercer's U.S. defined contribution record-keeping business. Mercer continues to directly serve client benefit administration needs in both the defined benefit and health businesses. The Transamerica alliance enables an integrated total benefit outsourcing solution. Health continues to benefit from Mercer Marketplace, despite lower growth in our administration business as we execute our strategy to improve profitability. Earlier this month, we issued an update on the progress of Mercer Marketplace. In total, the exchange now serves over 700,000 employees and retirees, and provides exchange access for an anticipated 1.5 million lives, an increase of 43% compared with last year. We are pleased with the continuing growth of Mercer Marketplace, although we would highlight we do not expect it to contribute to earnings in 2016. Oliver Wyman's revenue in the third quarter was $450 million, reflecting strong underlying growth of 9%. Through nine months, we are pleased with Oliver Wyman's underlying revenue growth of 6%, which builds on growth of 15% in the same period last year. The nine months' performance reflected revenue growth in all practice groups and business units. In summary, we are pleased with our third quarter and nine months' results as we continue to execute well. For the full year, we expect to deliver underlying revenue growth, margin expansion in both operating segments, and high single-digit EPS growth. With that, let me turn it over to Mike.

Thank you, Dan, and good morning, everyone. In the third quarter, we delivered underlying revenue growth in each of our operating companies. Both segments generated adjusted operating income growth with margin expansion. GAAP EPS rose 13% and adjusted EPS increased 13% as well. Considering the macro headwinds we are facing and our mitigation activities, we believe you get a clearer picture of earnings growth and margin improvement by gearing our results on a year-to-date basis. Our financial results through nine months show adjusted operating income increased 5% to $1.9 billion, the adjusted operating margin expanded from 18.5% to 19.7%, with RIS expanding 130 basis points and consulting increasing 90 basis points. Both GAAP and adjusted EPS increased 8%, indicative of our progress this year. Our results are being impacted significantly by the strength of the U.S. dollar against major currencies, especially the Euro. And in the second half of the year, the dollar has continued to strength against the Canadian and Australian dollar, and the currencies of most emerging markets. At the beginning of the year, we estimated the negative impact to EPS from foreign exchange would be approximately $0.15 per share, the highest level in MMC's history. We now estimate the full-year impact will be $0.18 per share – $0.06 in the first quarter, $0.04 in the second, $0.03 in the third and we now expect a $0.05 impact in the fourth quarter. We recently changed the structure of our U.S. defined benefit plan by dividing it into two separate plans, one that includes active colleagues and a second that includes inactives which account for about 70% of U.S. plan participants, both retiree and terminated vested. This structure better positions MMC to take advantage of derisking opportunities in the future such as voluntary lump sum offers and annuity purchases. This change has no effect on the future benefits earned by our U.S. colleagues or the benefits previously earned by former colleagues. We are using a longer amortization period for the inactive plan, which will lower annual pension expense although the benefit this year is modest. Many factors go into determining our pension expense: assumptions for mortality changes, asset performance and the discount rate, to name a few. As we typically do each year, we will provide an outlook for MMC's retirement plan expense on our fourth quarter earnings call in February, after the year-end measurement. While it is too early to give an estimate for next year, based upon the variety of factors we are looking at today, we believe the company is well-positioned to offset any retirement expense headwind we could face in 2016. Investment income. Trident III, which was created in 2003, sold its last two investments in the third quarter. As a result, MMC's carried interest is no longer subject to clawback. In the third quarter, the $34 million of investment income primarily came from Trident III. For the nine months, investment income was $39 million, a slight increase from $37 million last year. MMC's private equity portfolio is $85 million, which should generate only modest investment income on an annual basis. Total debt was $4.5 billion at the end of the third quarter. We took advantage of favorable credit market conditions by pulling forward the debt issuance we had contemplated for the first quarter of next year. Also influencing this decision was our robust acquisition pipeline, and we wanted to take advantage of the decline in the equity markets to repurchase our shares at attractive prices. The $600 million senior note issued in September has an interest rate of 3.75% and will mature in 2026. We've been restructuring our debt portfolio the last several years and have reduced our average interest rate from 5.6% to 3.5%. Our annual interest expense in 2011 was $200 million with $3 billion of debt outstanding. Today, with $4.5 billion of debt, our annual interest expense would approximately $175 million. We have reduced our refinancing risk by spreading out maturities over a number of years. For example, the next bond repayment of $250 million is not due until April of 2017. The debt is supported by a significantly higher level of operating earnings. The company is in a strong financial position today. Over the last few years, we have used our balance sheet while maintaining flexibility to take advantage of growth opportunities. The recent volatility in the equity markets allowed us to pull forward a portion of our share repurchases planned for the fourth quarter and the first quarter of next year. We repurchased 9.9 million shares in the third quarter for $550 million and over the first nine months we repurchased 23.4 million shares for $1.3 billion. Our tax rates fluctuates quarter-to-quarter reflecting the geographic mix of earnings, tax settlements, completion of open tax years and changes in international and local rates. For the third quarter, our adjusted tax rate was 28.4%. This represents an underlying tax rate of 29.5% and a slight benefit related to filing our 2014 federal tax return in September. For modeling purposes, based on the current landscape it would be reasonable to assume a tax rate of 29.5% in the fourth quarter and 29% for 2016. Our cash at the end of the third quarter was $1.3 billion with $445 million in the U.S. Uses of cash in the third quarter included $165 million for dividends, $190 million for acquisitions and $550 million for share repurchases. Through nine months, uses of cash included $470 million for dividends, $590 million for acquisitions and adjustments and $1.3 billion for share repurchases. At our Investor Day in March 2014, we made two commitments concerning returning capital to shareholders: one, double-digit annual dividend increases; and two, a reduction in our share count each year. We are delivering on these commitments for 2015, as we did in 2014. Our annual dividend increased 11.3% this year after increasing 10.4% last year. Our share count will decline for the second straight year. In fact, shares outstanding has declined by 27 million shares since Investor Day. Capital deployed for share repurchases, dividends and acquisitions was $1.2 billion for 2013. In 2014, capital deployed almost doubled, to $2.3 billion; and through the first nine months of this year totaled $2.4 billion. Our robust capital management has been supported by strong operating cash flows, the deployment of excess cash and increased debt. With that, I am happy to turn it back to Dan. Daniel S. Glaser - President, Chief Executive Officer & Director: Thank you, Mike. Before we go to Q&A, I would like to make a few comments about our recently announced CFO transition. Mark McGivney will become MMC's Chief Financial Officer at the start of 2016. Over the past year in his current position as Senior Vice-President of MMC Corporate Finance, Mark worked closely with Mike and me in developing and executing our financial strategy. Mark also has a very strong operational background and becomes the first MMC Chief Financial Officer to have served as CFO of both Marsh and Mercer. Mark was CFO at Marsh from 2007 to 2011, where he was a key member of my leadership team and oversaw substantial restructuring actions and operational improvements that re-established Marsh's profitability. From 2011 to 2014, Mark was CFO and Chief Operating Officer of Mercer, where he worked closely with Julio to drive strong improvement at Mercer. Welcome, Mark. We look forward to hearing from you on next quarter's earnings call. I would also like to say a few words about Mike, and to take a moment to recognize the many contributions he has made to Marsh and McLennan Companies over the past 34 years, the last three-and-a-half as Chief Financial Officer. Mike has worked tirelessly and creatively on an array of complex issues in leading our finance colleagues around the globe. By always demonstrating tremendous skill, knowledge and judgment, Mike leaves a legacy of extraordinary professionalism, commitment and dedication for us to build upon in the future. I am pleased that Mike will serve as a part-time senior advisor to MMC through the first quarter of 2016. On behalf of the 58,000 colleagues at Marsh and McLennan Companies around the world, I would like to say thank you, Mike, for your outstanding service. Operator, we are ready to begin Q&A.

We'll have our first question from Dan Farrell, Piper Jaffray. Daniel D. Farrell - Piper Jaffray & Co (Broker): Thank you, and good morning. I wonder if you could talk a little bit about the brokerage, organic specifically in Marsh, we're seeing a little slowdown in both the U.S. and internationally? Could you give us a little more color in terms of sort of headwinds from both pricing and exposure? And then could you talk about your abilities to offset that with net new business and how much you think you can offset further headwinds? Thank you. Daniel S. Glaser - President, Chief Executive Officer & Director: Sure. I think because much of the impact on our revenue as a company relates to some macro factors, like GDP or the P&C cycle, maybe it would be a good idea for me to give just a very brief comment, and then just go around the horn and have each of our operating companies give an assessment as to how they're – what they're looking at today and as they look forward – for revenue growth. And so I'm pretty pleased, because despite macro headwinds, as I mentioned from GDP, property and casualty rate, and some tough comps, MMC grew revenue by 4%. And year-to-date, revenue growth underlying is up 3% versus the prior year-to-date at 5%. So I feel pretty good about where we are and I'm confident that we remain in the 3% to 5% underlying revenue growth zone as an overall company. But Peter, do you want to start with Marsh? Peter Zaffino - Chairman - Risk & Insurance Services and President & Chief Executive Officer - Marsh, LLC, Marsh & McLennan Cos., Inc.: Sure. It's probably helpful to put a little context around the numbers for the quarter. Compared to last year's quarter three, again, it was a 5% organic growth so it was going to be challenging for us; that was the highest underlying growth rate we've had in the past 12 quarters, so it is a tough comparable year-over-year. Some countries have been particularly challenged, specifically in large, commodity-based economies like Australia, Canada, Brazil, even parts of Africa. So those have been a little bit of a headwind. And you mentioned pricing. Pricing has been orderly, but it has been coming off year-over-year and slightly from the second quarter to third quarter. We have been undergoing several yield initiatives to offset some of the rate decreases, and there's been some economic growth, albeit slow, in sales, payroll, total insured values. So overall, the 2% is not what we believe will be our medium- and long-term growth rates. But overall, when I look at the core, underlying parts of the business, new business, client retention is very strong. Daniel S. Glaser - President, Chief Executive Officer & Director: Okay. Thanks, Peter. Alex? Alexander Moczarski - Chairman; President and Chief Executive Officer, Guy Carpenter & Company LLC, Marsh & McLennan Cos., Inc.: Sure. The headwinds in the reinsurance area are well known, have been discussed, I guess, pretty much over the last three or four years. But we've continued to be able to grow. I said at the beginning of the year that some quarters might be clunky, but at the end of the day, we are still feeling fairly positive. The pipeline remains good. We're benefiting from segmentation and specialization. Shares have actually grown with the mid- to larger-sized insurance companies as they find our how good our teams are, how useful our tools are, and how sophisticated our solutions are. So, we're still looking in growth mode. Daniel S. Glaser - President, Chief Executive Officer & Director: So that takes care of RIS. Why don't we spend a little time on consulting, so Julio, you want to talk to us about revenue growth? Julio A. Portalatin - President & Chief Executive Officer, Mercer LLC,: Thanks, Dan. First, I'd like to just start off by saying that we were pretty pleased with the solid revenue growth that we had and demonstrated in the third quarter. I was particularly pleased with the balance of that growth across our LOBs [lines of business]. And you know we have a habit now of, quarter after quarter, finding a way to continue to have that spread between revenue growth and expenses so, of course, our margin continues to also improve. We've entered into a strategic alliance with Transamerica, which we think is going to be good for our clients, good for our going forward. And it continues to reinforce, as we've talked about in the past, dis-investing in some of our non-core, as we continue to invest in our core for growth into the future. Things like bolstering our talent business, investing in things like building Mercer Marketplace, and expanding our solutions even further in things like Workday with implementation capabilities, Jeitosa, et cetera. And expanding also our European investment capabilities, which has shown up in some of the improvement that we've had in assets under management, going to $1.38 billion this particular quarter. So our investments have been well-calculated. We continue to look for opportunities to accelerate our growth into the future by increasing footprint across the globe and doing other things. So we're pretty optimistic about how we can continue to generate growth at Mercer. Daniel S. Glaser - President, Chief Executive Officer & Director: Thank you. And just rounding it all out, Scott. Scott McDonald - Chief Executive Officer, Oliver Wyman Group, Marsh & McLennan Companies, Inc.: Sure. Dan, Oliver Wyman had a good quarter and year-to-date we've had strong growth across most sectors. In the nine months, all of financial services, health, actuarial, Lippincott and NERA grew more than 7%. And in any annual period, we continue to target growth planned at the range for MMC that Dan highlighted, so say 5% or better, driven by continued growth in the demand for high quality consulting as well as our ability to take share from competitors. It is important to keep in mind though, that given the nature of much of our business which is large, lumpy consulting projects, there'll certainly be volatility around that target from quarter-to-quarter. But overall, the business is in good shape and getting better, so we expect to be able to continue to grow. Daniel S. Glaser - President, Chief Executive Officer & Director: So, tanks. Dan, I know that was an overall long question but I figured revenue was likely to be on several people's minds so we wanted to cover it broadly. Do you have any other question? Daniel D. Farrell - Piper Jaffray & Co (Broker): No, that's helpful detail across all the segments. Thank you and Mike, all the best to you going forward.

Thanks, Dan. Daniel S. Glaser - President, Chief Executive Officer & Director: Next question, please.

Ryan Tunis, Credit Suisse. Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker): Hey, thanks, good morning. I guess my first question is for Mike and it's on the U.S. benefit plan, I guess, some of the optionality you've maybe created there. And you mentioned lump sums and perhaps some other alternatives. It sounds like to me that would probably eliminate some of the interest rate sensitivity you've seen around the pension expense and also maybe mitigate it. I just want to make sure I'm thinking about that correctly as a positive. And I guess, I don't want to call it a negative, but presumably this would also come with a cost, and would doing a lump sum or a close-out or that type of thing create a meaningful near-term use of cash? Daniel S. Glaser - President, Chief Executive Officer & Director: Let me start, Ryan and then I'll hand over to Mike. I think it's too premature to consider the cost of buyouts, et cetera, because we haven't determined yet whether we would offer a discount, if any, to the actual carrying costs that we have for those benefits. And so, we're at the early stages of working through those issues. We think that structurally setting up the two plans make it easier for us to address things like annuity buyouts and lump sum arrangements in an overall derisking effort for our inactives. But overall, I'll hand to Mike to see if he's got additional color. So, Mike?

Dan, you're exactly right. It takes a lot of time and effort at different stages to go through in looking at any major or substantial change to a defined benefit program. So we've actually been looking at the changes that may be inherent in the U.S. DB plan for a number of years, did the administrative work and then implemented the change to basically separate the DB plan into two separate plans, one active and one inactive. As Dan indicated, this is just a step along the road and we haven't made a decision on the timing of when to offer lump sum buyouts or annuity purchases. This will come in the future. The other thing that, Ryan, I would just put into context for you, the U.S. is our second largest plan. The U.K. is by far our largest plan, and then after the U.S. is followed by Canada and Ireland. We actually made some changes in Ireland as well. So, this is more of a long-term philosophical approach to organize all of our plans on a geographic basis, but do it within a common umbrella that Dan and the management team have established. Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker): Got it. Okay. And then I guess just shifting gears to exchanges. I think you mentioned that next year, despite 40% plus enrollee growth, not expected to be a contributor to earnings. And I guess just to get a better understanding of how that's impacting consulting margins, how does that roughly compare to the contribution of exchanges this year to the bottom line? Daniel S. Glaser - President, Chief Executive Officer & Director: I'll start with that and then I'll hand it over to Julio. I think the important thing to note is when we're looking at our exchange, the most important thing to us now is creating a platform and a framework for us to handle a lot of lives and to grow on a rapid but pretty consistent basis for many years to come. And so it really is all about creating the right quality organization. And I was quite pleased when I saw some of the survey data from clients of ours who've used our call center, and their satisfaction levels which were in the upper 90%'s and were even an improvement on last year. But you know for us in early stages you have to look at this as really a startup organization in some ways. And from that perspective, it's not going to be meaningful to earnings, at least on a MMC basis, for quite a while. And so, I just specifically wanted us to comment on it because I see some notes from time to time out there which just seemed to me that some folks might be getting ahead of themselves a little bit, and so we wanted to make some specific comments. But Julio, do you want to add to that? Julio A. Portalatin - President & Chief Executive Officer, Mercer LLC,: Not too much more to add, Dan. I think that was well answered. But in the context of overall MMC, $13 billion revenue, and then you think about the approximate $4.4 billion of revenue of Mercer, and then you think about the $1.5 billion global revenue we have in H&B, in context, this is clearly a growth strategy for us. And we are wearing the results within the P&L results of Mercer. And we will continue to do that, and I think that we have demonstrated that we can manage that in the context of the improvements that we've had in our margin over the last several years now. So, we'll continue to do that in time-and-time. And by the way, there are other things we invest in too, that we also wear inside the Mercer results and we'll continue to do that as well. Daniel S. Glaser - President, Chief Executive Officer & Director: It's really a great position to be in, to be able to deliver significant margin improvement in both RIS and in Consulting, while we're investing in those businesses and while we're acquiring in those businesses, and wearing higher amortization and deal costs, et cetera, et cetera. Next question, please.

Josh Shanker, Deutsche Bank.

Yeah, thank you. So I don't want to turn this into an exchange conversation, we've been through this before. But if you just walk through the process – and I think we've been through it in some places – on a current customer, if they choose to go onto your exchange, where do you lose revenues? Where do you gain revenues? And how do we see that come through the P&L? Daniel S. Glaser - President, Chief Executive Officer & Director: Okay. Well, a couple of things. One, half of the new clients that we had on the exchange this year were actually new H&B clients from Mercer, so that is an improvement over last year and shows the draw of the actual concept of an exchange. As Julio has mentioned before, our anticipation over a long period of time would be that when it's fully up and running, at scale, et cetera, that the likely exchange type of margin would be similar to the H&B margins that we have in a regular transaction; of course, supplemented and supported by the voluntary benefits programs that we sell through the exchange. And so, overall, I think it's way premature to even consider the margins. This is off into the future in terms of what our expectations are. And I can just tell you that when I look at overall Consulting margins, I'm quite satisfied. And for us, the exchange is a growth opportunity rather than an earnings opportunity at this stage. Do you have any other question, Josh?

Yeah. So for those new – I'm just surprised, I guess; not that it has to be significant – but of those new customers coming on aren't creating additional high-revenue margin, ultimately. It's always – the P&L – we've been over this about two years, I guess. The P&L seems in miss years (37:45), it seems like you are adding customers, you've already invested in the systems, I guess. I'm just surprised – there doesn't have to be a big contribution – but I'm surprised it would be a flat-to-negative contributor on profitability, I guess, at this point. Daniel S. Glaser - President, Chief Executive Officer & Director: Well, I would say a couple things to look at that. One, January 1 is the renewal date for the 2016 plans, and so, the statistics that Mercer released in their press release in October relate to 2016 and not to 2015. And also, this is a build-mode. This is about acquiring clients, marketing well, serving clients well, being able to handle large amounts of incoming. And so it's not just-in-time inventory of people and capabilities. I mean, that will be more how it operates several years down the road. But right now, this is a build, not a just add on. Next question, please.

Thank you.

Kai Pan, Morgan Stanley. Kai Pan - Morgan Stanley & Co. LLC: Good morning. Thank you. And first, congratulations to both Mike and Mark. My first question is on the foreign exchange impact. It looks like it's bigger than you anticipated at the beginning of the year. If currencies stay the same as today, do you see currency also a meaningful headwind for you to return to your 13% EPS long-term goal in 2016? Daniel S. Glaser - President, Chief Executive Officer & Director: Yeah. No. So Kai, when we look over periods of time, like 10 years or 20 years, within the company, foreign exchange has been a wash. And when we look at Marsh & McLennan and our footprint around the world, we are very much a global business and so foreign exchange is a part of our reported results. And we've got to wear foreign exchange. I think when you look back over the last few years, we were wearing $0.03, $0.04 per year of foreign exchange headwind and we didn't whine about it. We delivered 13%-plus EPS growth while wearing that kind of headwind. This year is remarkable. I mean, the spike of the strengthening dollar in this year really caught everyone by surprise and was shocking in its ascent. So in terms of this year, there was just no way to operate the company in a proper way without pulling back expense levers, incorrectly, I would say. But as we look forward, if we look at next year, if we return to the regular $0.03 or $0.04, $0.05 kind of headwind that we've had in past years, it shouldn't disrupt our ability to get back to our strong levels of EPS growth that we've been used to. I would just add for this year, it's about a six points of EPS growth has been lost to foreign exchange and so the delivery of 8% year-to-date on EPS growth is, in my view, a remarkable achievement for the company. Do you have anything else, Kai? Kai Pan - Morgan Stanley & Co. LLC: Yes. Second question on capital management, looks like you're already exceeding your $2.3 billion total capital management in 2014. You mentioned that you're going to basically third quarter, pulling forward fourth quarter and first quarter of next year buybacks. I just wonder are we going to see a meaningful decrease in buybacks and overall, if you think about your total capacity for capital returns, is the $2.3 billion still a runway annual number or you still has some excess cash capacity including debt as well as excess cash position that could be on top of that? Daniel S. Glaser - President, Chief Executive Officer & Director: Yeah. So as we outlined on Investor Day, we anticipated that we were going to be returning higher levels of capital to shareholders because we knew that we would have higher cash flows from operations, we were reducing cash on the balance sheet and we had declining calls on our cash and we also intended to increase our leverage while remaining prudent. And right now, our corporate debt to EBITDA is around 1.6 times, so I would say it's well within the level that we're comfortable with. And so this year, for a variety of different reasons – acquisitions have run at least on a year-to-date basis a little bit higher than what we had been doing the past couple of years and last year was a pretty big year as well. And so, doing $2.4 billion through nine months with the anticipation of our transaction with Jelf which is already announced and should happen within the next two to three months, combined with the idea that we pay out our bonuses in the first quarter and so we tend to be more cash light in the first quarter than in other quarters, I would say that you will see less share buyback certainly in the fourth quarter and most likely in the first quarter as well than what we've done this year. And when I look forward to next year, I think that 2016 probably looks a little bit more like 2014 – $2.3 billion kind of number sounds about right for return of capital to shareholders. Kai Pan - Morgan Stanley & Co. LLC: Thank you so much. Daniel S. Glaser - President, Chief Executive Officer & Director: Next question, please.

Larry Greenberg, Janney.

Thank you, and good morning. Just wondering if Alex could comment a little bit on the reinsurance market? Some have pointed to a reduction in third party capital this year into this sector and just the absolute level of prices in certain segments of the reinsurance business is maybe signaling that at least things aren't getting as bad on the margin and maybe we're about to trough out on where things are? Daniel S. Glaser - President, Chief Executive Officer & Director: Alex, you want to take that? Alexander Moczarski - Chairman; President and Chief Executive Officer, Guy Carpenter & Company LLC, Marsh & McLennan Cos., Inc.: Sure. So we calculate that is now about dedicated reinsurance capital of $400 billion, of which $66 billion is collateralized and $334 billion is rated. So more or less, $66 billion or $60 billion of alternative capital that's come into the marketplace and clearly, it's had its effect on rates and also on terms and conditions as the traditional reinsurers have tried to maintain market share. Do we feel that it's troughing out? We certainly are seeing some signs – I wouldn't call hardening – I'd say less softening than we've seen in the past. Frankly, the collateralized products and traditional reinsurance products are pretty much at the same price right now, sort of competing at the bottom, perhaps. So, there are signs that it's harder to place business than it was a year ago, but those are very, very pale signs. Daniel S. Glaser - President, Chief Executive Officer & Director: In a lot of ways, Larry, it's tougher to be a reinsurance capital provider than a reinsurance broker. Because for us, it's not about the premium per se, it's about the value we create; and in tough environmental markets like this, companies want and need advice and we're there to provide innovative solutions to help them cope with these difficult market conditions.

Great. Thank you. And I, too, want to congratulate Mike on just an outstanding career and best wishes in the future.

Ah, thanks, Larry. Daniel S. Glaser - President, Chief Executive Officer & Director: Next question, please.

Sarah DeWitt, JPMorgan.

Hi. Good morning. Daniel S. Glaser - President, Chief Executive Officer & Director: Good morning.

In the Consulting business, it's been a great story in terms of strong organic growth and margin expansion. Where do you think the margins in the Consulting business could head over time? Daniel S. Glaser - President, Chief Executive Officer & Director: Well, it's a good question. I start with an easy answer – higher than they are today – as I'm looking at Julio and Scott because they're the ones who have to deliver it on the ground. But overall, our margin story in Consulting has been pretty consistent over the last several years. And when you look at Consulting overall as a division in 2012, they delivered 150 bps of growth; in 2013, 160 bps; in 2014, 160 bps, and year-to-date 90 bps. In a lot of ways, our focus is more on earnings and growing our net operating income and that's how we're geared as a company and focusing on our output. And margin in a lot of ways is one of those outputs. We have an approach in the company in both Consulting and in RIS that revenue growth should almost always exceed expense growth. And then when that doesn't happen, we want it to be our choice; so we're making specific investment decisions in a quarter or two – and we call that being upside-down – and whenever we're upside-down we expect to get right-side up in the very near future, and so we have a consistent approach. But when we look at the work that we've done throughout our Consulting division, in part, it is a focus on a mix of business issue which favors our higher margin parts of the business. But as I was saying earlier, we are investing actively in things like MMX and others which pull down the margin of the Consulting division, but we're making the right decisions about investing with today's money and today's earnings to drive better opportunities for us in the future. Do you have another question, Sarah?

Yes. Thanks. And then just circling back on the private health exchanges, how large does that business need to be in terms of lives before it becomes a contributor to earnings? Daniel S. Glaser - President, Chief Executive Officer & Director: I don't know if we even have that answer, but I'm going to hand over to Julio because I think maybe a broader discussion around exchanges are in order. And I say that I don't even know if we have the answer because I know I don't know the answer and I have not pressed the business for it because I think it's so premature. At the end of the day, our focus on the exchange is not earnings and hasn't been earnings over the last few years. And so we're in a terrific position to be able to build the business without the pressure of delivering earnings today. And so, I think the overall focus of the leadership team on the exchange business is making sure we're positioned to capture the full opportunity over a multi-year basis. But Julio, do you want to add to it a bit? Julio A. Portalatin - President & Chief Executive Officer, Mercer LLC,: Yeah. Well, Dan, thank you. Mercer Marketplace is certainly an important contributor to our growth in the health business and will continue to be so for some time to come. We think that over time, it will continue to be the type of business we want to invest in, make sure that our clients have that option as we think through the strategies that they are thinking about for their benefits. And that's a very important distinction, right, because we are trusted advisors; strategy-first discussions with many of our clients take place all the time. And some have concluded that Mercer Marketplace is the right place for them to be able to maximize the desired outcome that they have for broader employee choice, a quality colleague experience, flexibility and savings. That continues to be the case and we will continue to invest because it will give us that kind of revenue uplift. And ultimately, it's what our clients want. If we end up with those discussions being this option, we want to be there for them. So as you know, in total, the exchange now serves over 700,000 employees and retirees, and with a projected exchange access for an anticipated 1.5 million lives. We're pretty pleased with that and we'll continue to invest. Daniel S. Glaser - President, Chief Executive Officer & Director: And I guess, just to round out the question on earnings and why we're not focused on earnings. Because in our overall size of company and overall earnings growth, it just doesn't matter. When something is not contributing to earnings, the first year it does, it contributes to earnings. So what's that number look like? And then the year after that, let's say it doubles its earnings for a couple years in a row. It's still relative to our overall size of Mercer, let alone the size of Marsh & McLennan Companies, just not big enough to get the level of attention on earnings that it may generate. But next question, please?

Vinay Misquith at Sterne Agee.

Hi, good morning. The first question is on margins and the RIS segment. Those expanded about 130 basis points year-to-date this year. Curious about how much you can expand margins when the organic growth slows to the 2% to 3% range, given that we're at pretty high margins right now? Daniel S. Glaser - President, Chief Executive Officer & Director: Yeah. No, it's a fair question. And I would say that when we look at the company overall, we're pretty satisfied with our margins. But again, we have a discipline about growing our revenue faster than growing our expenses, and so we will consistently see margin expansion going out into the future. It has not been a one or two or three year story in RIS with regard to margins. We are in the eighth consecutive year of margin expansion in RIS. And just as a reminder, even though we were talking about margins in 2011 and 2012 about, can you grow margins any more, you've come so far since 2008? We grew RIS margins 120 bps in 2012, 150 bps in 2013, 30 bps last year, we're at 130 bps year-to-date. So we have demonstrated an ability over a long period of time of growing margins. And where we sit today, and obviously we don't control all the macro factors, but we feel pretty comfortable that we will be able to expand margins into the future. And certainly, when we look at 2016 we would expect to see margin expansion in both segments. But as we've said before, margins are one of the last things we look about. We think about our organic growth, our level of organic investment to build a better company and support future levels of organic growth. We look at our earnings and whether we're growing NOI and delivering value for our clients and shareholders on that score. And then we look at margins; and margins to us is more of an outcome than anything else. We would gladly give up a bit of margin for faster levels of organic growth and when we see those opportunities, we'll take those opportunities.

Okay. Thank you. And the second question is around the debt. You mentioned that you pulled forward some debt issuance from next year, but your debt to EBITDA is only 1.6x. Are you planning on raising more debt next year and keeping the leverage ratio the same next year versus this year? Daniel S. Glaser - President, Chief Executive Officer & Director: Well, I'll hand it to Mike in a second, but I would say yes, we're at 1.6 but we were at 1.1. So ultimately in the last – well, if I just look at it from year-to-date last year, how we finished the year – ultimately when we think about debt we've got $1.1 billion of more debt than we had at year-end of 2014 and $600 million less of cash. So we obviously are flexing in different ways. And we've had levels of corporate debt to EBITDA over the last 25 years everywhere from say a one, two or three or three-and-a-quarter, and within that range we would be comfortable, depending on what factors were existing at that point in time. So I wouldn't say that we're targeting 1.6 or any other corporate debt to EBITDA at this point in time. We maintain a prudent approach. And what I could say is that it would be unlikely that we would create more leverage only to buy back more shares but certainly other opportunities, both organic and acquisition-related, would be more likely that that would generate more leverage. But, Mike, you want to add to that?

Yeah, Dan, what I'll say – I would just add a few things. We always look for balance on everything, and so it's a balance with regard to leverage, with regard to the growth opportunities we see. But we don't begin by looking at it as just at leverage. We look at the operating cash flows and the growth of the company, and then we think, okay, what's a normalized level of debt to accompany the growth that we're looking at and those very strong operating cash flows? But the other thing we look at is really, what is our refinancing risk and what's our liquidity? And as I indicated in my remarks, we've spent really, the better part of three-and-a-half years reshaping our debt maturity ladder so that we do not have any major towers coming against us in any one year, and in fact, over the next four or five years, we have very small amounts of debt coming due. And so we've created a situation where the debt maturity ladder is very nice, which gives us a little bit more flexibility if an opportunity presents itself. The other thing I would say is I kind of look at it as an interest expense budget, so to speak, and that's why we also talked about, at $3 billion of debt a number of years ago, our interest expense on an annual basis was about $200 million. You look at the $4.5 billion today, and it's actually less than $170 million, but if you throw in the cost of commercial paper and the revolver, that's why I said it's in the neighborhood of $170 million to $175 million. So we look at it many different ways, not just leverage, but we think we have a lot of flexibility and if an opportunity presents itself in the future, as Dan indicated, we can take advantage of it. Daniel S. Glaser - President, Chief Executive Officer & Director: Next question, operator?

Elyse Greenspan, Wells Fargo.

Hi, good morning. I just had one quick question first on the private healthcare exchanges. I was wondering if you can break down the enrollment between those that chose the self- versus the fully-insured option. And I guess how does that compare to what you saw last year as well as your expectations? Daniel S. Glaser - President, Chief Executive Officer & Director: Okay, thanks. Julio, do you want to take that? Julio A. Portalatin - President & Chief Executive Officer, Mercer LLC,: Sure. Thank you for the question. In the fully insured and self-insured, we're really not seeing people make conscious decisions to change from what they have traditionally already been implementing. So if they were fully insured before, they tend to stay fully insured, and if they're self-insured, they tend to stay self-insured. So as an example, I will show you that based on the clientele that we accumulated in our first year of 2014, it was 75% fully insured/25% self-insured and in 2015 it was 60% fully insured and 40% self-insured, and in 2016 it's about the same: 57% fully insured and 43% self-insured. Daniel S. Glaser - President, Chief Executive Officer & Director: Okay. Thank you. I think we have time for one more question, operator.

Charles Sebaski, BMO Capital Markets.

Good morning. Thanks for fitting me in. Daniel S. Glaser - President, Chief Executive Officer & Director: Good morning.

I was hoping to get a little bit more color on the Marsh Agency business and how that has been a contributor to the margin expansion there and whether or not given the size, being as you said $900 million in revenue now, that we might be able to get to see that as a separate broken out line item, given that $900 million kind of falls in the size of your other discrete line item businesses. Thanks. Daniel S. Glaser - President, Chief Executive Officer & Director: Well, Charles, I'm glad you got the last question because I had all the series of exchange questions for Julio and meanwhile we've got this $900 million business that we've invested in for the last seven years, but Peter, do you want to take that and talk a little bit about the Agency? Peter Zaffino - Chairman - Risk & Insurance Services and President & Chief Executive Officer - Marsh, LLC, Marsh & McLennan Cos., Inc.: Sure, and in terms of its contribution to margin, as Dan mentioned in his opening comments, we're wearing the amortization for the acquisition. So while it is a contributor, that is certainly going to be a headwind for the short run. The revenue that we had mentioned on $900 million is the estimated annualized as we hit into next year, so that's not what is actually being earned this year. But if I step back, Marsh & McLennan Agency is hitting on all cylinders. We have acquired the highest quality agencies across the United States, now created substantial hubs within California and Texas. Our pipeline is as strong as it's been for spokes and fold-ins, so we'll be able to expand our business and be more dense in areas that we want to expand. And its organic growth engine has been terrific this year and it's been very balanced. We've had growth within property and casualty and employee health and benefits and believe that will continue. So overall, incredibly pleased with what we've acquired, what we're building, how they're coming together as a leadership team and we're very optimistic for the future.

How does pricing compare this year on – the pipeline you said is very strong – on what's going on relative to last year? It seems to be a very competitive market in that business. Daniel S. Glaser - President, Chief Executive Officer & Director: Yeah, I would say overall, I don't think it's very much different this year to last year, it is a competitive market, but I would say the difference is really when you look back four or five years ago, the multiples were lower than they are today, so it's very important for us to understand that. One of our focuses is on quality and history of good performance and stability of the leadership team, the chemistry, all of those other factors become more important as we evaluate agencies versus each other and determine which ones should be a part of Marsh & McLennan Agency. It's also very important for us to really come to an understanding of what the EBITDA really is. That may be even more important than multiple because these are largely all private companies, and so there is a pro forma aspect of figuring out what EBITDA is, and it takes some skill in determining what is ongoing EBITDA. And so, I think there may be some players out there that might get the multiple right but they get the EBITDA wrong. We want to be right on both the EBITDA and the multiple. Daniel S. Glaser - President, Chief Executive Officer & Director: But I think that just about does it. We've passed our one hour commitment. And I'd like everyone for joining us this morning. I'd particularly like to thank our clients for their support and our colleagues for their hard work and dedication in serving them. I hope everyone has a very good day and let's go, Mets.

That does conclude today's conference. Thank you for your participation.