Marsh & McLennan Cos. (MMC) Daniel S. Glaser on Q4 2015 Results - Earnings Call Transcript

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Marsh & McLennan Cos., Inc. (NYSE:MMC)

Q4 2015 Earnings Call

February 04, 2016 8:30 am ET

Executives

Daniel S. Glaser - President, Chief Executive Officer & Director

Mark Christopher McGivney - Chief Financial Officer

Peter Zaffino - President & Chief Executive Officer, Marsh LLC

Alexander S. Moczarski - President and CEO, Guy Carpenter & Co., LLC

Analysts

Ryan J. Tunis - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Charles Joseph Sebaski - BMO Capital Markets (United States)

Elyse B. Greenspan - Wells Fargo Securities LLC

Quentin McMillan - Keefe, Bruyette & Woods, Inc.

Operator

Welcome to Marsh & McLennan Companies Conference Call. Today's call is being recorded. Fourth quarter 2015 financial results and supplemental information were issued earlier this morning. They are available at 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 and 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 risks and uncertainties and a variety of factors may cause actual results to differ materially from those contemplated by the forward-looking statements. For a more detailed discussion of factors that cause could actual results to differ materially from those expressed or implied in any forward-looking statements made today, please refer to our earnings release for this quarter and to our most recent SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2014, all of which are available on the MMC website.

In addition, during the call today we may discuss certain non-GAAP financial measures, including adjusted operating income, adjusted operating margin and adjusted earnings per share. For our discussion on these non-GAAP financial measures as well as our reconciliation of these measures to the most closely comparable GAAP measures, please refer to the schedule of our earnings release in this quarter.

I'll now turn the call over to Dan Glaser, President and CEO of Marsh & McLennan Companies.

Daniel S. Glaser - President, Chief Executive Officer & Director

Thank you, Shelan, and good morning and thank you for joining us to discuss our fourth quarter results. I'm Dan Glaser, President and CEO of Marsh & McLennan Companies. I'm very pleased to welcome our new CFO, Mark McGivney. In addition to having a very strong operational background, Mark becomes the first MMC Chief Financial Officer to have served both Marsh and Mercer as CFO. Welcome, Mark.

Joining me on the call today are the operating company 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.

It is difficult to accurately predict where the world is headed. I recently return from Davos, where ongoing global market volatility was a major point of discussion. Our clients need advice now more than ever to navigate these uncertain times. For Marsh & McLennan, opportunities are abundant to help our clients face the challenges of the day, many of which revolve around risk, strategy and people. These challenges are highlighted in the Annual Global Risk Report produced by the World Economic Forum with the help of Marsh & McLennan Companies. This Report explores the mounting and interconnected risks faced by corporations of all sizes as well as government entities and individuals.

Over the last several years, the dialogue has evolved from mainly economic risks to include geopolitical, societal and environmental concerns. We certainly live in an age of risk. According to the UN, 2015 was characterized by social and political instability, as some 60 million people were forcibly displaced, the largest number in history. Geopolitical tensions are also escalating between global and regional powers in places like Iran, Saudi Arabia, Syria, Ukraine, Korea and the South China Sea. Market dislocations in China and drastic reductions in commodity prices have raised concerns about global growth and dented business confidence. And financial markets are skeptical about the effectiveness of central banks given the limited tools at their disposal in a near zero interest rate environment.

Amidst this global uncertainty, it is easy for companies to embrace self-fulfilling pessimism. While we remain cautious on the global front, we see several factors that are positive for Marsh & McLennan Companies. The developed world continues to post modest but steady GDP growth and improving employment rates. And the emerging markets, while volatile, are a long-term driver of growth. The demand for our services remains strong. We are optimistic about our prospects for continued organic growth and our acquisition pipeline is in good shape.

Our fundamentals are rock solid. We are stronger strategically, operationally and financially than at any time in the past decade. We have a deep understanding of our clients and the markets in which we operate. We set challenging yet realistic objectives for our performance and we deliver on our commitments.

So let's review our performance in 2015. We capped off the year with an outstanding fourth quarter, posting our highest underlying revenue growth of 2015 at 5%. This was our 11th consecutive quarter of at least 3% underlying revenue growth. We also delivered 8% adjusted EPS growth, driven by higher operating income with margin expansion in both the RIS and consulting segments. In terms of our full-year performance, MMC produced underlying revenue growth, margin expansion in both segments and meaningful EPS growth. Underlying revenue grew 4%, representing our sixth consecutive year in the 3% to 5% growth range. This was also our sixth consecutive year of margin expansion in both the RIS and consulting segments.

This expansion was balanced across the segments, with Risk and Insurance Services rising 90 basis points to 23.3% and Consulting up 80 basis points to 17.3%. On a consolidated basis, the margin rose 100 basis points to 19.1%, our highest level in 12 years. Adjusted EPS increased 8% to a record $3.05, while absorbing $0.18 of negative FX impact. Since 2009, our adjusted EPS has grown at a CAGR of 13.5%, consistent with the 13% long-term target we set at Investor Day in 2010 and reaffirmed at Investor Day in March 2014. This was accomplished despite approximately $200 million of FX headwinds during this six-year period, a yearly average of $0.04 per share.

Before I discuss our view regarding 2016, I would like to spend a few moments on recent developments in the insurance industry. There is a noticeable amount of change occurring at many insurance companies. We have seen large-scale M&A, senior management changes, a reduction in the underwriting appetite at several companies, as well as a willingness at some firms to reconsider reinsurance as a way to reduce volatility.

These developments are not overly concerning to us or our clients, since the changes do not relate to issues of financial strength or solvency. In fact, there are potential positive outcomes for MMC, such as volatile markets could result in a flight to quality, as clients seek brokers who have a depth of experience and capability. Clients may lean even more toward their broker to assess and recommend markets. More underwriting discipline may come to the market. This is really hard to call; it is just as likely to create more competition in the short term. And high quality underwriting talent is becoming more dispersed. This could lead to a prolonged, healthy, competitive market, with higher levels of innovation, new product offerings and improved service.

Now turning to 2016. For the year, we expect to grow underlying revenue, expand margins, deliver strong growth in adjusted EPS and return meaningful capital to shareholders. Starting with organic revenue growth, one of the key strengths of MMC is the diversity of our geographic footprint. It is an important driver of our long-term growth. The developing world should grow faster over the longer term, owing to generally higher levels of GDP growth, under-penetration of insurance and the ability to sell more of our consulting services globally. However, these countries have been experiencing more volatility recently, with many impacted by declines in commodity prices.

While there is concern about the emerging world and the overall strength of the global economy, the U.S. and UK continued to perform relatively well. These two countries represent our largest geographies, providing stability to our revenue.

On a consolidated basis over the last six years, we have grown underlying revenue in a range of 3% to 5%, and we view this range as the likely outcome for 2016. Underpinning our revenue has been low-single digit GDP growth and benign inflation in the developed world, with modestly better growth in the emerging markets. In addition, we anticipate low-single digit global P&C premium growth as increases in insured values and other exposures should offset the effects of rate reductions.

Turning to margins, we have just concluded our eighth consecutive year of margin expansion. Over this period, our adjusted operating margin has improved more than 1,000 basis points to 19.1%. As we have said many times, we do not have a margin target. We view margin expansion as a natural outcome of managing a business properly to grow revenue and earnings.

We are disciplined around managing our annual expense growth in line with revenue growth and maintain flexibility to adjust accordingly. While it is conceivable expense growth may exceed revenue growth in a given quarter, we would not expect this to occur for a full year. So, as we look at 2016, we expect to deliver margin expansion in both segments for the seventh consecutive year.

Moving to EPS growth, 2015 was an unprecedented year for FX. We posted 8% adjusted EPS growth, or 14.5% on a constant currency basis. If foreign exchange rates remain at their current levels, we anticipate about $0.07 per share of adverse currency impact in 2016, less than half of what we saw last year. Given our current view of FX and global macroeconomic conditions, we expect strong EPS growth in 2016 at a level approaching our long-term target.

Turning to capital management. We are a cash business. As we produce high levels of earnings growth, our cash flows should grow at a similar rate. We will continue to deploy capital in excess of our free cash flow. We expect to increase debt balances each year as earnings growth increases our debt capacity. As mentioned on our last earnings call, we anticipate capital deployed in 2016 for dividends, acquisitions and share repurchases to approximate $2.3 billion. We reiterate our annual commitments to reduce our share count and grow our dividend per share by double digits, and we will continue to grow the firm through acquisitions that build our market position, client services and geographic footprint.

I also want to spend a few moments on our investment philosophy. We believe in balance and, in this context, it's the balance between delivering strong financial performance today while investing for our future. MMC has a solid foundation and we have the flexibility to deliver strong financial performance in a variety of market conditions. We have balance sheet flexibility to take advantage of opportunities while preserving our ability to manage through periods of stress.

Since 2009, we have invested nearly $7 billion for growth and efficiencies. This includes CapEx of $2.2 billion, 115 acquisitions and investments totaling approximately $4.6 billion and an increase in our head count of over 10,000 colleagues. We have also invested in and rewarded our colleagues. In each of the last eight years, our overall global incentive compensation pools have increased while we have driven significant margin expansion.

Acquisitions are a core competency of Marsh & McLennan Companies. We don't just buy companies; we develop relationships over time. We see chemistry and a cultural fit. And we invest in growth, not just geographically, but by segment, by line of business and by capability. We were active in 2015, completing 27 acquisitions and investments for approximately $1.2 billion.

Lastly, I want to thank our 60,000 colleagues for their contributions. And, in particular, my leadership team. I am privileged to work with a strong leadership team that is defined by high standards, diversity of thought, cohesiveness and collegiality. We are a team that takes its commitments seriously and we have delivered year after year.

In summary, we are very pleased with our fourth quarter and full-year results, as we continued to execute our long-term strategy for growth. As we look to 2016, we are well-positioned to deliver underlying revenue growth, margin expansion in both operating segments and strong EPS growth.

With that, let me turn it over to Mark to give you more details on our performance.

Mark Christopher McGivney - Chief Financial Officer

Thank you, Dan, and good morning, everyone. I'm very pleased to be joining the call today as the CFO of Marsh & McLennan Companies. MMC capped off the year with an outstanding fourth quarter. We delivered underlying revenue growth across each of our operating companies and both segments generated adjusted operating income growth with margin expansion.

GAAP EPS rose 31% including a $37 million pre-tax gain from Mercer's sale of a U.S. defined contribution recordkeeping business. This gain has been excluded from our adjusted results. We believe this presentation is more indicative of the underlying performance of the company.

On an adjusted basis, for the quarter EPS increased 8% to $0.71. Our full year 2015 results represent another year of strong performance. Underlying revenue growth was 4% with solid growth at all four operating companies. Adjusted operating income increased 5% to $2.5 billion despite a significant foreign exchange headwind. Our overall adjusted operating margin expanded 100 basis points to 19.1%, with both segments contributing.

GAAP EPS grew 12% and adjusted EPS rose 8%, in line with the high-single digit guidance we provided throughout the year. For Risk and Insurance Services, revenue in the fourth quarter was $1.7 billion with underlying growth of 4%. Adjusted operating income grew 3% and the margin increased to 21.1%. For the year, underlying revenue growth was 3%, adjusted operating income rose 3% to $1.6 billion and the margin increased 90 basis points to 23.3%, the highest annual margin in over a decade.

Adjusted operating margins in RIS have improved every year since 2007. Marsh's fourth quarter performance was strong across the board. Revenue was $1.5 billion, with underlying growth of 4% driven by strong new business. Growth in the quarter was notable as it came on top of 4% growth in the fourth quarter of 2014. The U.S. Canada division grew 3% led by Marsh & McLennan Agency. In the international division, underlying revenue grew 5% with 3% growth in EMEA, reflecting strong performance in the UK, 4% growth in Asia-Pacific and 13% in Latin America.

In December, Marsh completed its acquisition of UK-based Jelf Group. This acquisition supports Marsh's strategy to expand globally in the middle market. For the year, Marsh's underlying revenue rose 3%, reflecting growth of 3% in both the U.S. Canada and International division. This was Marsh's fifth consecutive year with underlying revenue growth of at least 3%.

Guy Carpenter's revenue was $217 million in the fourth quarter, an increase of 5% on an underlying basis. EMEA and Latin America were areas of strength. For the full year, underlying revenue growth was 2%, a good result considering the ongoing challenges facing the reinsurance industry.

Moving to Consulting. Revenue was $1.6 billion in the fourth quarter, reflecting strong underlying growth of 5%. Adjusted operating income increased 5% to $265 million. The adjusted operating margin expanded 60 basis points to 16.7%, the 16th consecutive quarterly increase.

For the year, underlying revenue growth was 5% and adjusted operating income increased 4%, exceeding $1 billion for the first time. Consulting has built a track record of achieving higher adjusted operating margins in recent years. In 2015, the margin expanded 80 basis points to 17.3%, its highest level in over 30 years. Since 2010, Consulting's margins have improved by 600 basis points.

Mercer's revenue was $1.1 billion in the fourth quarter, an underlying increase of 5%, which follows 5% growth in the fourth quarter of last year. Solid performance was achieved across all three of Mercer's major geographies: North America, EuroPac and Growth Markets. The revenue increase was driven by health, up 8%, and talent, up 7%. Investments rose 2% and retirement grew 1%. Health continues to benefit from growth in both the core business and Mercer Marketplace, and talent once again performed well.

In the quarter, Mercer completed several acquisitions, including CPSG Partners, a provider of Workday implementation services. In addition, Mercer successfully completed the sale of its U.S. defined contribution recordkeeping business in the quarter. This activity highlights the strategy Mercer has been executing over the last several years, investing in growth opportunities while deemphasizing areas that do not meet our return requirements or are not core to its business. For the year, Mercer's underlying revenue growth was 4%, with investments increasing 7%, health up 6% and talent up 5%. Retirement was flat. Mercer's underlying revenue growth has been 3% or better for the last five years.

Oliver Wyman delivered another strong quarter. Revenue in the fourth quarter was $476 million, reflecting underlying growth of 7%. Growth was driven by Financial Services, Lippincott and the Actuarial business. For the year, Oliver Wyman's underlying revenue growth was also 7%, which builds on a strong growth of 15% in 2014.

As we typically do at this time of year, let me update you regarding our Global Retirement Plan. As you may recall, in the first quarter of 2015 we recognized a non-recurring credit of $125 million as a result of changes to our U.S. Post-65 Retiree Medical Plan. This action represented a substantial portion of the mitigation we undertook to offset the increase in annual retiring (23:05) expense we faced last year due to declines in global interest rates. Late in 2015, we made additional retirement plan changes that essentially replaced this credit, not only through 2016, but beyond.

As discussed on our last earnings call, the most impactful change was in the structure of our U.S. defined benefit plan, where it was divided into two separate plans. This structure better positions the company to take advantage of derisking opportunity. It also resulted in extending the amortization period for actuarial gains and losses in the inactive plan. This lowers annual pension expense. As a result of these changes coupled with the many other factors that go into determining the year-end measurement of our pension expense, we expect a year-over-year decline in retirement expense of approximately $30 million for 2016, or $0.04 per share.

Turning to investment income. In the third quarter of 2015, we recognized investment income of $29 million from the final settlement of our Trident III investment. At year-end, our private equity portfolio amounted to $76 million, and we expect to generate only modest investment income going forward versus the $38 million we recognized in 2015. The anticipated reduction in our investment income for 2016 should essentially offset the $0.04 benefit from lower retirement expense.

As we anticipated on our earnings call in October, the FX headwind in the fourth quarter was $0.05 per share and $0.18 for the year. This was by far the highest annual level of FX impact in MMC's history. If foreign exchange rates remain at their current levels, we expect FX to adversely affect EPS by approximately $0.07 in 2016. The majority of the impact will be felt in the first half of the year.

Our tax rate fluctuates quarter-to-quarter reflecting the geographic mix of earnings, tax settlements, completion of open tax years and changes in international and local tax rates. Our adjusted tax rate in the fourth quarter was 29.7% and the rate for the year was 28.7%, reflecting discrete items. Based on the current landscape, for modeling purposes it would be reasonable to assume a tax rate of 29% in 2016.

Total balance sheet debt at year-end was $4.4 billion, slightly below the third quarter level, reflecting the recent repayment of a $50 million term loan. In 2015, balance sheet debt increased by approximately $1 billion. The term structure of our debt portfolio provides us significant flexibility with few near-term repayment obligations. Our next debt maturity is a $250 million senior note due in April 2017. Due to the substantial work we have done to restructure our debt over the last three years, our average cost of debt has fallen to 3.7%.

In the fourth quarter, we repurchased 1.4 million shares of our stock for $75 million. For the year, we bought back 24.8 million shares for $1.4 billion, the highest level in our history. As we mentioned on our third quarter call, we pulled forward a portion of the share repurchases we had plans for both the fourth quarter and 2016. As a result, our buyback activity is expected to be less than 2015. As Dan mentioned, this year we expect to deploy roughly $2.3 billion of capital across share repurchase, acquisitions and dividends.

In 2015, we returned over $2 billion of capital to shareholders in the form of dividends and share repurchases. Overall, we deployed $3.2 billion of capital across share buybacks, acquisitions and dividends, a record year of capital deployment for MMC. Sources of this capital included our operating cash flows, the addition of $1 billion of balance sheet debt and a reduction of $600 million in balance sheet cash.

Since 2013, we have added $1.5 billion of balance sheet debt and reduced our cash balance by over $900 million. For the year, uses of cash included $632 million per dividend, $1.2 billion for acquisitions and investments and $1.4 billion for share repurchases.

For the fourth quarter, we deployed $811 million of cash that included $164 million for dividends, $572 million for acquisitions and $75 million for share repurchases. Cash on our balance sheet at year-end stood at $1.4 billion, which was down from $2 billion at the end of 2014. Cash in the U.S. was $580 million. Once again, in 2015 we delivered on our capital return commitments. We reduced our share count by more than 3% and increased our dividends per share by over 11%.

With that, I'm happy to turn the call back over to Dan.

Daniel S. Glaser - President, Chief Executive Officer & Director

Thank you, Mark. Operator, we are ready to begin Q&A.

Question-and-Answer Session

Operator

The question-and-answer session will be conducted electronically. We'll have our first question from Ryan Tunis, Credit Suisse.

Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker)

Hey. Thanks. Good morning. I think my first question is for Dan. I think it's in response to talking about 2016 growth. And I think you said that hoping it approaches the longer term target, which is 13%. And I guess thinking about the currency headwind, that would seem to imply a pretty decent chunk of either organic growth or margin expansion. So I'm just wondering if there's anything outside of those segments – I don't know if it's tax rate or anything along those lines that might help push that growth rate upward.

Daniel S. Glaser - President, Chief Executive Officer & Director

Sure. Thanks, Ryan. Actually, in terms of how we get close to our long-term target and, in fact, achieve it over the long term, there's no magic formula. It has basically, obviously, top-line growth is a significant factor. And the more we grow the top line, the easier it is to expand margins. Although we have proven our ability to expand margins even in times of pretty low organic growth.

We feel very comfortable that when you look over the last number of years how we have grown in the 3% to 5% organic growth area that for 2016, the way it feels like to us is that we'll be in that range and we will have margin expansion in both segments and, therefore, our operating earnings will be quite strong. And fundamentally that is the backbone to how we will deliver EPS growth. So, there's nothing in our current thinking of it that involves issues like tax, et cetera.

The one thing we don't control is FX. We don't control the macroeconomic conditions in the world either, but we're less concerned about that because that sort of has a lag factor. But FX hits you between the eyes in any one quarter and in any one year. But if you look at our results, even in 2015 on a constant currency basis, it was very strong and we would expect that to continue in 2016.

Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker)

Okay. I appreciate that. And then just a follow-up for Mark. I think, first of all, how should we think about just cash pension contributions next year relative to this year? And then also just wanted to make sure I understand these changes correctly. Is it such that – that's on the U.S. benefit plans. Is it such that if interest rates do remain low that you will not need to continue to come up with new mitigating factors in the coming years? Is it such that over the next few years that this is sort of a permanent offset if interest rates remain low? Am I thinking about that right?

Mark Christopher McGivney - Chief Financial Officer

That's right, Ryan. The change to the U.S. plan is sort of baked into the base, so that will persist. In terms of cash contribution, in 2015 we contributed $195 million and we expect only a modest uptick in 2016, around $217 million.

Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker)

Okay. That's all. Thanks.

Daniel S. Glaser - President, Chief Executive Officer & Director

Okay. Thanks a lot. Next question, please?

Operator

Charles Sebaski, BMO Capital Markets.

Charles Joseph Sebaski - BMO Capital Markets (United States)

Good morning. Thank you. I was hoping to get a little bit more color on MMA and thoughts on the organic growth, where it stands in size now, if there's any disparity between that and the more traditional Marsh book in terms of growth of profile or margin contribution. Anything you provide, I'd appreciate.

Daniel S. Glaser - President, Chief Executive Officer & Director

So I'll take that to begin with and then hand it over to Peter to give more commentary. But the MMA is a core strategy of the firm and really was approved by the company's board in July of 2008. And I point that out just to say we've not only had changes of CEO at the parent company level, we've also had changes of CEO at the Marsh subsidiary level. But the strategy itself we've stuck to it, we've done the hard yards and we've built the business over multi years that we're incredibly proud of and we think well positioned for throughout future.

We always said in the past that we expected MMA to be able to deliver organic growth which was stronger than Marsh U.S. over time at an EBITDA margin which would be similar to Marsh's overall margins.

And so, Peter, do you want to add to that?

Peter Zaffino - President & Chief Executive Officer, Marsh LLC

Thanks, Dan. As Dan said, that this has always been a well thought-out strategy. We like the segment in the middle market and it has been one that we wanted to grow in through acquisition and through organic growth. We've been able to attract the highest quality agencies in building MMA. And attributes of high-quality agencies are terrific people, track records of strong organic growth and they've been able to do that once we've acquired them. Then we have shared best practices across those high-quality agencies, and so that quality has led to more quality.

A big part of the organic growth, though, is not only have we acquired high-quality agencies, we've invested a lot of in our sales capacity. And so we're trying to grow net sales capacity each and every year. We now have over 700 full-time producers within MMA and that makes a very big difference.

And then lastly is that Dave Eslick and his leadership team have executed very well. So, not only are we growing the segment that's strategically where we wanted to be in, attracting the highest quality agencies, we're also investing in executing on sales capacity. And so the growth has been balanced across the U.S. and balanced between the H&V (34:57) and Property and Casualty.

Charles Joseph Sebaski - BMO Capital Markets (United States)

Could you let us let us know what the revenue is for 2015 for MMA?

Peter Zaffino - President & Chief Executive Officer, Marsh LLC

Well, the estimated annualized revenue is around $900 million.

Charles Joseph Sebaski - BMO Capital Markets (United States)

Excellent. I appreciate that. I guess just another for overall business on the P&C side and regarding the growth for 2016. What's the pricing expectation do you have kind of baked in for the P&C market? And I guess, overall, how much of the business today is commission versus fee-based? So I'm trying to get some understanding or appreciation of the sensitivity to changes in P&C pricing.

Daniel S. Glaser - President, Chief Executive Officer & Director

Sure. I'll take that to start and hand over to Peter. First, whatever percentage we give you on commissions versus fees, I would bear in mind that it's not a direct insulation. If there's a prolonged, long-term soft market, it puts downward pressure on fees as well in a competitive environment. So it's not that fee business is completely insulated from the vagaries of the market. But having said that, when you look at how we run the company, over long stretches of time because of the amount of capital and competition amongst insurance companies on a global basis, we expect there to generally be a downward trend on rating levels.

Now, insurance rates are the most important thing in a lot of respects to an insurance company. Insurance premiums are more important to intermediaries. And so when we look at exposure units and other factors around the world, we expect to see some slight growth in insurance premiums notwithstanding some of the downward pressure that is existing on rating levels.

But, Peter, you want to add to that?

Peter Zaffino - President & Chief Executive Officer, Marsh LLC

There's not a lot to add, Dan. I think you captured a lot of it. I think what we've seen in the pricing has been – we've seen more falloff in 2015 compared to 2014. But the sequential from quarter to quarter we have not seen accelerate. So, we have seen more rate come off in 2015 in the fourth quarter compared to the fourth quarter of 2014. And so we would expect that in 2016, it will be modest. I don't see it significantly accelerating. We've seen property come off a little bit more, but it's been very orderly, very measured, and we think it would be a balance.

In terms of how you should think about commission versus fee, we've mentioned that we're growing a lot in MMA, and so the commission we'll book is growing as a overall percentage of the book, not only from organic growth but as we're making more acquisitions, and then the international is driven more by commission.

Daniel S. Glaser - President, Chief Executive Officer & Director

So thank you, Charles.

Charles Joseph Sebaski - BMO Capital Markets (United States)

Thank you very much.

Daniel S. Glaser - President, Chief Executive Officer & Director

Next question, please? Thank you, Charles. Next question.

Operator

Elyse Greenspan, Wells Fargo.

Elyse B. Greenspan - Wells Fargo Securities LLC

Hi. Good morning. I was hoping to...

Daniel S. Glaser - President, Chief Executive Officer & Director

Good morning.

Elyse B. Greenspan - Wells Fargo Securities LLC

...to spend some time on the outlook for Guy Carpenter. The growth picked up in the fourth quarter. So, first of all, was there anything kind of one time in there? And then also as you think about 2016 and the outlook for the rating environment as well as new business there, how do you see the growth within Guy Carpenter for the coming year?

Daniel S. Glaser - President, Chief Executive Officer & Director

Yeah, and so first I just like to say about Guy Carpenter, it's been some tough sledding over the last couple of years of market conditions. But when we look over a long period of time, Guy Carpenter has grown its underlying revenue 22 out of the last 24 quarters. So, we feel very good about how they're positioned and what they're delivering to the firm, truly one of our crown jewels.

But, Alex, you want to add to this?

Alexander S. Moczarski - President and CEO, Guy Carpenter & Co., LLC

Thanks, Dan. So, let's bear in mind that the fourth quarter is our smallest quarter. But obviously we're very pleased with the 5%, and that came from good client retention. We had strong new facultative business in Latin America and the UK. And Marine Specialty, Continental Europe and U.S. facultative all outperformed. In addition, we got a maximum performance bonus from a major global client. So there's nothing one-off about it, but bear in mind it is our smallest quarter.

We remain innovative and we remain relevant to our different segments. We've added new resources to our existing highly talented pool. We made investments in leading-edge client-facing technologies, and these are being recognized by our clients. And we're harnessing the alternative capital. We were top of the leagues in the cat bond space last year and we've got a good pipeline coming on.

And the good news I think is that some of our major clients have signaled their interests in returning to the reinsurance markets to meet their capital needs. So we can seek and expect revenue growth for this year. I'm not sure how much it's going to be. It may be bumpy. But we're a growth company and that's the way. We lean forward.

Daniel S. Glaser - President, Chief Executive Officer & Director

Yeah. So, I think, from where we sit today, I mean, we'll know more as the year progresses. But from where we sit today, if you look at Guy Carpenter's performance in 2015, it's probably the best indication of the full-year performance as to what we would expect in 2016 as well.

Elyse B. Greenspan - Wells Fargo Securities LLC

Great. Thank you. And then in terms of the acquisition pipeline, you, in your remarks, said that it was in good shape. Have you guys seen any change in multiples on transactions? And then also, as you think about 2016 and your capital plan, you did end the year with a sizeable transaction with the Jelf Group. How do you think about the size of potential transactions that are in the pipeline and what you might consider going forward?

Daniel S. Glaser - President, Chief Executive Officer & Director

Good question. A complicated question. It's got several parts to it. So let me talk about it broadly for a second. First of all, we do have a good pipeline. both in RIS and in consulting. It is a global pipeline. When we evaluate our pipeline, though, we generally look at a lot of different things or at least cast a glance over a lot of different things but do very few for a variety of reasons. So even last year, which was a very active year for us where we had 27 acquisitions and investments, we actually reviewed more than 10 times the amount of what we actually did. And so that gives you an idea of the labyrinth that needs to go through for us to say we want to do this acquisition and conclude it.

And multiples are a factor. I mean, last year I can tell you even though we did $1.2 billion of transaction in terms of transaction value, we walked away from well more than $1.2 billion of transaction value and generally we walked away because of either concerns about growth, the difference between our view of what the potential growth could be in the future rather than the seller's view of what the potential growth could be, or price expectations.

And so we believe we're disciplined. Clearly over a course of a number years we've seen some multiple expansion, particularly for larger type of acquisitions because that attracts PE and other parties to it. But actually for mid-size, smaller, folding, tuck-in type of acquisitions, the multiples, while they may be a bit more than they were five years ago, we still think are quite reasonable. And if you look at our real strategy, I think you would see Jelf was a bit of an outlier size-wise, not much of an outlier, but a bit. You look at the acquisitions that we've done over the last five years. The average acquisition transaction value has been a bit about $40 million per transaction. And so it's more of a string of pearls than chunkier than that. They'll be the odd larger company, but it's not a change in strategy in any way.

Now, in terms of capital plan, Mark, do you have some comments on that?

Mark Christopher McGivney - Chief Financial Officer

Yeah. I think, overall, we maintained a balanced approach to a lot of elements of our strategy, and capital is no exception. As Dan said, we firmly believe that to drive value over the long term, we're going to consistently and continue to invest or reinvest in the business through M&A to extend our business, build our business. As he talked about, we maintain high standards in terms of discipline and expected returns. We expect to maintain this balance going forward. But it is balanced. And if you refer back to what we did in 2015, we deployed $1.2 billion of capital to acquisitions, but $2 billion of capital was returned to shareholders.

Daniel S. Glaser - President, Chief Executive Officer & Director

And so if you look at our overall, we've been talking about returning capital of about $2.3 billion-ish for 2016. And if you think in terms of dividend, that probably is a number like $650 million to $700 million with a double-digit increase that we would deliver in 2016, which leaves you $1.6 billion maybe $1.7 billion between acquisitions and share repurchase. And the acquisition number is a question mark because we have no budget around acquisitions. But that level of return would exist and generally we would prefer if it was close to being balanced. But we'll work through that.

Any other questions, Elyse?

Elyse B. Greenspan - Wells Fargo Securities LLC

No. That was great. Thank you very much.

Daniel S. Glaser - President, Chief Executive Officer & Director

Perfect. Thank you. Next question?

Operator

Quentin McMillan, KBW.

Quentin McMillan - Keefe, Bruyette & Woods, Inc.

Good morning. Thanks very much, guys. I wanted to first ask just about the global growth in the RIS segment, particularly Latin America was obviously really strong this quarter. Wanting to understand if that was a little bit more chunky one-off because it was obviously a fairly challenged macro down there. And then more largely, what you're seeing in the developing markets and what you look for for 2016.

Daniel S. Glaser - President, Chief Executive Officer & Director

I'll hand over to Peter in a second, but I just can't resist celebrating our business in Latin America a little bit. So, Peter, I'm sorry if take some of the thunder on it. But I just want to say the fourth quarter and also the year, it's not at an anomaly at all for Marsh in Latin America. Marsh Latin America has grown underlying revenue 8% or more for six straight years. So, a tremendously strong performance through good times and tough times.

So, Peter, do you want to add?

Peter Zaffino - President & Chief Executive Officer, Marsh LLC

We had a terrific fourth quarter. 13% was led by Peru, Mexico and Colombia. So, those are three out of the four top countries in terms of size in Latin America. We did have a weaker fourth quarter in 2014. So perhaps the growth is a little bit more than perhaps the run rate. We did 8% for the year. But if I look at the fundamentals, we had really strong client retention, very good renewal growth from the rollover of new business in the prior year. But, again, strong client retention, and we grew through new business. So, they really executed on a balanced basis and really pleased with the recovery for the year. And as Dan said, it's been six straight years with 8% or greater. And we just have a terrific business there.

Quentin McMillan - Keefe, Bruyette & Woods, Inc.

All right. Great. Thanks so much. And then just following up on the M&A question, 2hat we've seen in the high-yield markets of spreads really starting to widen seems like it's going to make it harder for some of those private equity competitors who have been bidding up these deals, as you previously alluded to, to continue to try to maybe outbid you, guys or pay economic values that are just not sustainable. A, is that a trend that you have seen in any way in the marketplace so far? And, B, is that something that you guys are monitoring and think could be a potential positive going down the line?

Daniel S. Glaser - President, Chief Executive Officer & Director

So it's certainly a potential positive. It takes a while to turn up, I would say. So, we haven't seen anything and we very rarely actually compete with PE. I know plenty of people do, but ultimately our general attitude with regard to acquisitions is we very rarely, if at all, participate in auctions and, if PE is involved, we almost always take a pass because we want the owners to have made up their mind as to whether they want to be part of Marsh & McLennan Companies, part of a strategic long-term viable operation or whether they're looking to optimize compensation in the short term and they're willing to roll the dice as to what the ultimate outcome and the ultimate owner someday down the road would be. And so we don't bump up against PE as much as you would think.

Quentin McMillan - Keefe, Bruyette & Woods, Inc.

Okay. Great. Thanks so much, guys.

Daniel S. Glaser - President, Chief Executive Officer & Director

Sure. Next question, please?

Operator

We have no further questions in the queue at this time.

Daniel S. Glaser - President, Chief Executive Officer & Director

Okay. Well, that's fine. That's probably a record. But I would just like to thank everybody for joining us this morning and thank our colleagues specifically for their support and our clients for all the good things that we do together and wish everybody a good day. Thank you very much.

Operator

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

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