Consulting revenue in 2012 increased 2% compared with 2011, or 4% on an underlying basis. Mercer’s revenue was $4.1 billion in 2012, an increase of 4% on both a reported and underlying basis compared with 2011, with growth in each of its businesses. The underlying revenue growth was primarily driven by 7% increases in both health and investments. Oliver Wyman’s revenue decreased 1% in 2012 compared to 2011, but increased 3% on an underlying basis.
As a U.S. domiciled parent holding company, Marsh & McLennan Companies, Inc. is the issuer of essentially all of the Company's external indebtedness, and incurs the related interest expense in the U.S. Further, most senior executive and oversight functions are conducted in the U.S. and the associated costs are incurred primarily in the United States.
The Company derives a significant portion of its revenue and operating profit from operating subsidiaries located outside of the United States. Funds from the Company’s operating subsidiaries located outside of the United States are regularly repatriated to the United States out of annual earnings. At December 31, 2013, the Company had approximately $1.4 billion of cash and cash equivalents in its foreign operations, substantially all of which is considered to be permanently invested in those operations to fund foreign investments and working capital needs. At the current time, the Company does not intend to repatriate any of this cash. The non-U.S. cash and cash equivalents considered permanently reinvested includes approximately $190 million of operating funds required to be maintained for regulatory requirements or as collateral under certain captive insurance arrangements. The Company expects to continue its practice of repatriating foreign funds out of current annual earnings. While management does not foresee a need to repatriate the funds which are currently deemed permanently invested, if facts or circumstances change, management could elect to repatriate them, if necessary, which could result in higher effective tax rates in the future.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or agent, the Company generally collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurance underwriters. The Company also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims proceeds are held by the Company in a fiduciary capacity. Risk and Insurance Services revenue includes interest on fiduciary funds of $27 million, $39 million and $47 million in 2013, 2012 and 2011, respectively. The Consulting segment recorded fiduciary interest income of $5 million in 2013 and $4 million in both 2012 and 2011. Since fiduciary assets are not available for corporate use, they are shown in the consolidated balance sheets as an offset to fiduciary liabilities.
There were 22.6 million, 32.0 million and 38.9 million stock options outstanding as of December 31, 2013, 2012 and 2011, respectively.
The consolidated statements of income for 2013 include approximately $50 million of revenue and $9 million of net operating income, respectively, related to acquisitions made during 2013.
In the fourth quarter of 2011, management initiated a plan to sell the Marsh BPO business, which was completed in August 2012. Marsh's BPO business, previously part of the Marsh U.S. Consumer business, provided policy, claims, call center and accounting operations on an outsourced basis to life insurance carriers. Marsh invested in a technology platform that was designed to make the Marsh BPO business scalable and more efficient. During 2011, Marsh decided that it would cease investing in the technology platform and instead exit the business via a sale. The Company wrote off capitalized software of $17 million, net of tax, which is included in discontinued operations in 2011.
Reflects increases due to the impact of foreign exchange in both years. 2013 also reflects a reduction due to purchase accounting adjustments.
The Company recorded an intangible asset impairment charge of $5 million and $8 million in the third quarter of 2013 and 2012, respectively, in the Risk & Insurance Services segment.
Common/Collective trusts: Valued at the quoted market prices of the investments at year end.
The Company maintains certain defined contribution plans for its employees, including the Marsh & McLennan Companies 401(k) Savings & Investment Plan (“401(k) Plan”), that are qualified under U.S. tax laws. Under these plans, eligible employees may contribute a percentage of their base salary, subject to certain limitations. For the 401(k) Plan, the Company matches a fixed portion of the employees’ contributions. The 401(k) Plan contains an Employee Stock Ownership Plan feature under U.S. tax law. Approximately $453 million of the 401(k) Plan’s assets at December 31, 2013 and $375 million at December 31, 2012 were invested in the Company’s common stock. If a participant does not choose an investment direction for his or her future contributions, they are automatically invested in a BlackRock LifePath Portfolio that most closely matches the participant’s expected retirement year. The cost of these defined contribution plans related to continuing operations was $50 million in 2013, $50 million in 2012 and $48 million in 2011. In addition, the Company has a significant defined contribution plan in the U.K. The cost of the U.K. defined contribution plan was $23 million, $ 21 million and $20 million in 2013, 2012 and 2011, respectively. As noted above, effective August 1, 2014, a newly formed defined contribution plan will replace the existing defined contribution and defined benefit plans with regard to future service.
The Company's policy is to issue treasury shares upon option exercises or share unit conversion. The
Our activities are regulated under the laws of the United States and its various states, the European Union and its member states, and the other jurisdictions in which the Company operates. In the ordinary course of business the Company is also subject to subpoenas, investigations, lawsuits and/or other regulatory actions undertaken by governmental authorities. In this regard, in November 2013, Mercer received a subpoena from the New York Department of Financial Services in connection with a review of New York's public pension funds.
Includes inter-segment revenue of $5 million in both 2013 and 2012 and $4 million in 2011, interest income on fiduciary funds of $27 million, $39 million and $47 million in 2013, 2012 and 2011, respectively, and equity method income of $8 million, $11 million and $14 million in 2013, 2012 and 2011, respectively.
Includes inter-segment revenue of $31 million, $34 million and $36 million in 2013, 2012 and 2011, respectively, and interest income on fiduciary funds of $5 million in 2013, and $4 million in both 2012 and 2011.