The impact of acquisitions made in the Consulting segment. In July 2010, Mercer acquired Innovative Process Administration (“IPA”), a provider of health and benefit recordkeeping and employee enrollment technology. In August 2010, Mercer acquired ORC Worldwide, a premier provider of HR knowledge, data and solutions for professionals in numerous industries. In January 2011, Mercer acquired Hammond Associates, the third largest investment consulting company for endowments and foundations in the U.S.
In Marsh, revenue in 2009 decreased 5% from 2008, reflecting a 4% negative impact of foreign currency translation and a 1% decrease in underlying revenue. These results reflected the difficult economic environment, in addition to the pressure on insurance premium levels, commissions and fees. On a geographic basis, Marsh’s International revenue increased 2% on an underlying basis reflecting a 9% increase in Latin America and a 5% increase in Asia Pacific, reflecting strong new business growth on a global basis, partly offset by a decrease of 4% in the U.S. / Canada region.
Expenses in the Risk and Insurance Services segment decreased 10% in 2009, compared with the prior year. Underlying expenses decreased 8% with the remaining reduction due to the impact of foreign currency exchange of 4% partly offset by an increase of 1% due to the impact of acquisitions. The decline in underlying expenses reflects lower compensation and benefit costs due to reductions in the number of employees as a result of restructuring activities and a decrease in other operating cost categories. The decrease in other expenses includes a reduction in professional liability costs reflecting the impact of a $33 million charge recorded in the third quarter of 2008 and a reduction of $39 million in net settlement, legal and regulatory costs (reduced by insurance recoveries in 2009). The expense decrease also reflects lower restructuring and related charges in 2009 as compared with 2008.
Consulting revenue in 2010 increased 5% compared with 2009, or 3% on an underlying basis. Mercer’s revenue was $3.5 billion in 2010, an increase of 5%. On an underlying basis, Mercer’s revenue increased 2%. Within Mercer’s consulting lines, revenue on an underlying basis in 2010 was flat compared with 2009, reflecting increases of 5% in health and benefits and 2% in rewards, talent & communications, offset by a 4% decline in retirement. The growth in health and benefits was driven by increases in all geographies. The increase in rewards, talent & communications was driven by a resurgence of demand for compensation surveys partially offset by lower rewards and talent consulting assignments concentrated in the first half of the year. Outsourcing revenue increased 3% on an underlying basis, driven by new client wins primarily in Australia. Investment consulting & management revenue increased 16% on an underlying basis, due to strong growth in all geographies. Oliver Wyman’s revenue increased 6% to $1.4 billion in 2010, or 7% on an underlying basis, driven by double-digit revenue growth within its financial services practice. Other areas, including the healthcare, transportation and consumer sectors also generated double-digit revenue growth.
the Company contributed $221 million to its U.S. pension plans (including the $200 million discussed above) and approximately $237 million to non-U.S. pension plans, compared with $22 million for U.S. plans and $400 million for non-U.S. plans in 2009.
As of December 31, 2010, there was $23.4 million of unrecognized compensation cost related to stock option awards. The weighted-average periods over which the costs are expected to be recognized is 1.7 years. Also as of December 31, 2010, there was $206 million of unrecognized compensation cost related to the Company’s restricted stock, restricted stock unit and deferred stock unit awards.
In December 2010, the FASB issued amendments to the guidance for pro-forma disclosures arising from business combinations. The amendments specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro-forma disclosures to include a description of the nature and amount of material, nonrecurring pro-forma adjustments directly attributable to the business combination included in the reported pro-forma revenue and earnings. The amendments are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The Company does not expect the new guidance to have a material impact on the Company’s future disclosures.
Effective January 1, 2009, the Company adopted the guidance for calculating EPS using the two-class method with retroactive application to prior periods. The impact of adopting the guidance is discussed in Note 1 to the consolidated financial statements.
Losses related to pension/retiree plans (net of income tax credit of $56, $172 and $562 in 2010, 2009 and 2008, respectively)
The following unaudited pro-forma financial data gives effect to the acquisitions made by the Company during 2009, 2010 and 2011, as if they occurred on January 1, 2009. The pro-forma information adjusts for the effects of amortization of acquired intangibles. The pro-forma information also reflects the classification of Kroll’s operating results in discontinued operations for all periods presented. The unaudited pro-forma financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved if such acquisitions had occurred on the dates indicated, nor is it necessarily indicative of future consolidated results.
Amortized intangible assets consist of the cost of client lists, client relationships and trade names acquired. The gross cost and accumulated amortization is as follows:
The following schedules provide information concerning the Company’s non-U.S. defined benefit pension plans and non-U.S. postretirement benefit plans.
The table below sets forth a summary of changes in the fair value of the plans’ Level 3 assets for the year ended December 31, 2010:
Level 2. Financial assets and liabilities whose values are based on the following:
The senior notes are publically registered by the Company with no guarantees attached.
The Company has a portion of insurance fiduciary funds described in Note 3 that are invested in high quality debt securities and classified as available for sale. Gross unrealized gains (pre-tax) on these securities that are included in other assets and accumulated other comprehensive income in the consolidated balance sheets were $7 million and $17 million at December 31, 2010 and 2009, respectively. For the twelve months ended December 31, 2010, 2009 and 2008, the Company recorded gross unrealized gain/(losses) (pre-tax) of $(10) million, $(7) million and $24 million, respectively, related to these investments. These amounts have been excluded from earnings and reported, net of deferred income taxes, in accumulated other comprehensive income (loss), which is a component of stockholders’ equity.
At January 1, 2008, the liability balance related to restructuring activity was $112 million. In 2008, the Company accrued $327 million and had cash payments of $217 million related to restructuring activities that resulted in the liability balance at January 1, 2009 as reported in the above schedule.
included as an exhibit to the Company’s Form 8-K filed on February 1, 2007, we agreed to indemnify GWL with respect to certain Putnam-related litigation and regulatory matters. Most of these matters have been resolved.