Welcome to Marsh & McLennan Companies conference call. Today's call is being recorded. First quarter 2014 financial results and supplemental information were issued earlier this morning. They are available on the company's website at www.mmc.com. Before we begin, I would like to remind you 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 risks and uncertainties, and a variety of factors may cause actual results to differ materially from those contemplated by the forward-looking statements. Please refer to the company's most recent SEC filings, which are available on the MMC website, for additional information on factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
I'll now turn the call over to Dan Glaser, President and CEO of Marsh & McLennan Companies.
Thank you. Good morning, and thank you for joining us to discuss our first quarter results reported earlier today. I'm Dan Glaser, President and CEO of MMC. Joining me on the call today is Mike Bischoff, our CFO. I'd also like to welcome our operating company CEOs, Peter Zaffino of Marsh, Alex Moczarski of Guy Carpenter, Julio Portalatin of Mercer, and Scott McDonald of Oliver Wyman Group. Also with us this morning is Keith Walsh, Head of Investor Relations. I am pleased with our first quarter results. We've had a strong start to the year and are continuing the earnings momentum we've achieved over the past several years. In the quarter, we produced solid underlying revenue growth, substantial margin improvement, and double-digit growth in earnings while returning capital to shareholders through dividends and share repurchase.
This performance was very much in line with the themes we laid out in March at our Investor Day, which I would like to spend a few moments reinforcing. First, MMC is a unique company with several competitive advantages, including the quality of our colleagues, deep client relationships, a vast global footprint, depth of intellectual capital and capabilities, and a cohesive, collaborative culture. We are strong strategically, operationally, and financially, and we are getting stronger. Our strategy is to focus on growing revenue, earnings, margins, and cash flow with low capital requirements and to manage risk intelligently. We are committed to long-term EPS growth of 13%, increasing cash flows, reducing our share count each year, and delivering double-digit dividend increases.
With this level of growth, combined with lower calls on our cash for pension and restructuring, we anticipate generating substantially higher levels of cash flow for dividends, share repurchase, and acquisitions. In 2013, we allocated $1.2 billion to these three items. In 2014, we expect capital available for dividends, share repurchase, and acquisitions to grow 75% to $2.1 billion. Let me give you a little more color on our first quarter results. MMC's underlying revenue growth was 4%. This exceeded the increase in underlying operating expenses as it has for all but one quarter over the past six years. Our consolidated adjusted margin rose 120 basis points to 20.9%, our highest quarterly margin since 2004. Even as we produce exceptional financial results, we continue to make ongoing investments.
Our level of capital expenditures reflects this approach and is part of our balanced capital allocation strategy to drive sustainable growth to revenue, earnings, and cash flow. Looking at our Risk and Insurance Services segment, revenue was $1.8 billion, with underlying revenue growth of 3%. Adjusted operating income increased 6% to $500 million, and the margin rose 60 basis points to 27.2%, the highest in a decade. This margin expansion is notable when you consider that it is on top of a 210 basis point expansion in the first quarter of last year. At Marsh, revenue was $1.5 billion, an underlying revenue increase of 4%. This growth reflects solid renewals with strong client retention in all major areas and strong new business growth in Asia Pacific and in the Middle East. All major geographic regions contributed to the solid revenue performance in the quarter.
In the U.S. Canada division, underlying growth was 2%. The international division expanded 4% as underlying revenue growth continued throughout Marsh's vast footprint. Latin America, with growth of 11%, reported its sixth consecutive quarter of double-digit growth. Asia Pacific also continued to generate strong growth, rising 9%. Guy Carpenter's revenue was flat on an underlying basis, in line with our expectations. Revenue growth in international operations, marine, and facultative was offset by higher levels of capacity, increased retentions by clients, and significant rate reductions in many lines. In the consulting segment, revenue was $1.4 billion, up 5% on an underlying basis. Adjusted operating income was $225 million, an increase of 19% from the prior year. The segment's margin increased 190 basis points to 15.8%, the highest first quarter margin in at least 20 years. Mercer's revenue was $1.1 billion, an underlying increase of 3%.
The revenue increase was spread across all geographic regions, with particular strength from growth markets. Growth was driven by investments, which increased 8%. Retirement growth of 4% reflects strong levels of benefit administration work unique to this quarter. Oliver Wyman's revenue in the first quarter was $371 million, reflecting strong underlying growth of 11%. The results reflect significant growth in the financial services business and strong growth in Europe and North America. In summary, we are well-positioned to deliver on the long-term goals we discussed at Investor Day, which should lead to superior returns for our shareholders. With that, let me turn it over to Mike.
Thank you, Dan, and good morning, everyone. MMC had a strong first quarter. Revenue was $3.3 billion, an increase of 4% on both the GAAP and an underlying basis. Adjusted operating income grew 11% to $682 million, the highest level of quarterly profitability in a decade. The consolidated adjusted margin rose 120 basis points to 20.9%, and adjusted EPS increased 11% to $0.81 from $0.73 last year. Investment income was $13 million in the first quarter, compared with $21 million in the prior year. We anticipate minimal investment income in the second quarter. Foreign exchange was a slight negative in the quarter, impacting both segments. Corporate expense decreased to $43 million on an adjusted basis. Our quarterly run rate should average about $45 million. With our strong first quarter results, we remain on target to deliver excellent EPS growth in 2014.
We would like to share with you some insight into MMC's quarterly earnings growth this year. For example, consistent with our view expressed during the last earnings call, we expect foreign exchange to be a drag throughout the remainder of the year, with the greatest impact, approximately $0.02 in the second quarter, occurring within the RIS segment. In the second quarter, we expect investment income to be approximately $0.03 lower on a year-over-year basis. In keeping with our 2014 business plan, we expect higher expense growth in the second quarter for the RIS segment. Looking forward, our business plan and current outlook calls for stronger earnings growth in the second half of the year, well beyond what we reported this quarter. We expect our performance for the entire year to be consistent with what we indicated at Investor Day in March.
We are pleased with our first quarter results and are confident of a successful operating and financial performance this year. Debt. Even with a higher level of debt, interest expense in the first quarter decreased to $42 million from $44 million in the first quarter of last year. By refinancing at attractive interest rates, the average cost of our debt has declined 50 basis points to 5.1%. As we approach the July debt maturity of $320 million, we will crystallize our thinking as it relates to the amount, timing, and maturity of the refinancing. We also increased MMC's financial flexibility in the quarter by amending our revolving credit facility, which increased the size from $1 billion to $1.2, extended the maturity from 2016 to 2019, and reduced both the drawn and undrawn pricing.
We are pleased that earlier this week, Moody's upgraded MMC's senior debt, reflecting our strong financial position. At the end of the quarter, we had $1.38 billion of cash, with approximately $260 million in the U.S. Cash utilized in the first quarter included outlays for our annual variable compensation programs, $360 million for acquisitions, $138 million for dividends, and $100 million to repurchase 2 million shares of our stock. This marks the eighth consecutive quarter of share buybacks. To reiterate what we stated at Investor Day, we plan to grow both organically and through quality acquisitions. We will consistently return excess capital to shareholders, both through meaningful share repurchases and double-digit growth in dividends, and we are committed to reducing our share count year after year. With that, I am happy to turn it back to Dan.
Thanks, Mike. Operator, we're ready to begin the Q&A.
Thank you, sir. If you would like to ask a question at this time, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone today, if you would please disengage your mute button or pick up your handset to ensure that our equipment can hear your signal. If you find that your question has already been asked and answered, you may remove yourself from queue by pressing star two. Again, that is star one for any questions. We'll take our first question from Michael Nannizzi with Goldman Sachs.
Thanks. Could you talk a bit about what happened more specifically at Oliver Wyman and whether or not that was an exaggerated quarter of growth or if some of the items that you talked about in your prepared comments should lead to sort of outsized growth relative to every other quarter since this one for the remainder of the year?
Okay. A couple of things and then I'll hand over to Scott. First, I think you're seeing some of the impact of an improving economy and improved business confidence. Also the year-over-year comparison is a fairly easy one for OW. I'm giving a wink at Scott right now, but it's a fairly easy one for OW because it was a short quarter in the first quarter of last year. Scott, you want to give us some more flavor?
Sure. Mike, we had a good first quarter. It was driven by pretty broad-based strength in the business. A big performance from our financial services business, which is our largest business. Also strength across most of the other businesses, including our Lippincott, the branding firm, our manufacturing, transportation, energy, retail services businesses. That's picking up on the continued modest strength in the U.S. economy. I think there's been surprising strength in the European economy, a little more than we would have expected six months ago. Still modest, but surprisingly stronger. International remains mixed, driven by different things around the world. Overall, the business feels strong. The only caveat I'd make is the one that Dan made. We've had four quarters of improving performance, that means our comps were pretty easy this quarter.
I expect continued strong growth through the rest of the year, the comps will get harder.
Right. Given that this was even higher than 2008, Q1, which I think was the highest first quarter you guys have experienced at Oliver Wyman. Obviously you had a big downdraft in Q1 last year, even on a run rate basis, it seems like this was a pretty good top-line quarter there. Okay. I guess the next question. In reinsurance, did you have any negative impact from softer reinsurance pricing? Can you talk about any capital markets activity that you saw there?
Yeah. Well, we've certainly seen some negative impact from reinsurance pricing. Alex, you want to go deeper?
Yeah, sure. We talked about the headwinds we would face at Investor Day. The good news is that actually our new business was very, very strong in most regions and very healthy in the U.S. due to our segmentation execution which we also discussed on Investor Day. This filled the void left by reduced demand for our transactional products that we successfully marketed in the first quarters of the last two years. We're replacing one-time transactions with recurring business for new clients. That's also reducing our dependency on the large clients that tend to have stronger balance sheets now and are probably buying, in some cases, less reinsurance. Interestingly enough, in other cases, more reinsurance because the cost of capital is interesting.
As regards to capital market transactions, we actually have just closed a good one yesterday, which I'm happy about, but it's lumpy business and so the first quarter didn't see much of that.
Got it. Is that capital market activity able to offset some of the margin pressure that you might see from lower reinsurance pricing?
We'll take it all.
I think what you're seeing would be multiple things. You've got higher levels of capacity. You have insurance companies, some of the large ones retaining more risk. You have increasing alternative capacity and that creates a bit of competitive activity on how some of the traditional reinsurers are trying to maintain their book in the face of incoming capacity. There's an awful lot of factors that are at play. Our feeling about Guy Carpenter was, as we said last quarter, we anticipated a pretty tough year. Guy Carpenter has been our fastest grower over the last several years, really in that 5%-6% organic range. This year we're expecting to see some growth. It's modest growth, it's not a year that we would drive for margin expansion within Guy Carpenter. It's one of our finest businesses.
It's a true jewel, this is a year that we're going to focus on serving clients and getting new ones. I would just make the comment because sometimes brokers miss stating that lower pricing and broader terms and conditions are good for our clients, we are in the client business. Fundamentally, many of our clients will look to obtain other products that they may not have had before because of the lower pricing and broader terms and conditions. Next question, please.
We'll take our next question from Larry Greenberg with Janney Capital.
Good morning. It's a hard exercise from our position, it looked to me like the contribution to revenues in RIS from acquisitions was a little bit lower than I would have expected. Is there anything you could comment on there, or perhaps any visibility you could give us going forward based on the number of deals that you've already done?
I'll hand over to Mike, who will summarize our acquisition strategy. I think what you're seeing is some element of our string-of-pearls strategy. Marsh's base and RIS's base is quite significant. It's a $6.5 billion segment, you have to do a lot of pearls in order to see some real shift in movement on the top line. Mike, you want to just elaborate?
Yeah. Dan, you're absolutely correct. I think what we saw in 2012 was a lot of increased activity in MMA because of changes in the tax law. As we look at the acquisition impact in the Risk and Insurance Services area over the course of 2013, you felt that. Conversely, because so much was done at the end of 2012, it was fairly limited over the course of 2013. What we did and what I indicated in the first quarter of this year is that we had six acquisitions, the largest of which is Barney & Barney, which is part of our MMA long-term strategic plan. Barney & Barney essentially closed for us in mid-quarter, so you wouldn't feel the full impact of that.
When you put all of that together, Larry, with what Dan says, just the size of insurance services operations, that's why you end up with the impact that you have in the quarter.
Peter, do you have something to add?
Yeah, Dan Glaser, I think in addition to Mike Bischoff saying that Barney & Barney closed mid-first quarter, the first quarter in terms of revenue is their smallest. You'll start to see more even distribution in the second, third and fourth.
Okay, perfect. Any other comments, Larry Greenberg?
Okay. No, I guess just in general, Dan Glaser, we're seeing a little bit of shift in the firmness on the primary side of commercial lines. Are you seeing anything surprising or unusual at this point?
I'll address it a little bit, then if Peter Zaffino has anything to add. I think, first of all, in my 30-year career, most markets will have downward pressure and upward pressure on terms and conditions. That is sort of the state of the insurance marketplace. We have these little periodic short periods of firmness which give way very quickly. We've built our business really to operate in a shoulder environment and generally a softer environment. There's a lot of insurance and companies out there competing for business. Having said that, I'd also look at the differences between the United States and international. Internationally, it's been relatively soft forever. We're still seeing softness. That hasn't changed. Even in areas where there's catastrophe exposure, there was a firmness in pricing over the last couple of years, and that's beginning to come off.
We're seeing that internationally. In the U.S., the U.S. is probably the best market from a rating standpoint from an insurance company's perspective. Still, the upward trajectory doesn't feel that it's stable. Peter, do you have something to bring in?
I agree, Dan. What we have seen is modest decreases. If you look at quarter-to-quarter and year-over-year, they've been low single-digits, driven more by property, as Dan said, where the peak exposures or companies are deploying cat. They did enjoy some rate increases over the last 2 years, those are coming off. Where we are seeing that offset a little bit is that Scott mentioned the economies are starting to recover. In the U.S., as an example, in the low single-digits, we started to see total insured values increase, payroll modestly increase, as well as sales. We're seeing that offset the slight decreases in pricing.
Thanks, Larry. Next question, operator.
We'll go next to Sean Dargan with Macquarie.
Yeah, thanks. Could you maybe help us frame what the impact of FX headwinds was in the quarter?
Sure, Mike?
Yeah. When we were looking at it going into the year, we were modeling it out where foreign exchange would have been at the end of January and how that would feel for the entire year. As we indicated, it was in the neighborhood of $0.04-$0.05 with a fairly minimal impact in the first quarter, most of the impact in the second quarter in the RIS segment, the rest of it probably equally split between the third and fourth quarter. It certainly was between $0.00-$0.01 in the first quarter.
Okay, thank you. I guess another numbers question. The intangible amortization expense increase was fairly modest, thinking about the acquisitions that you just mentioned a few minutes ago, will that be moving higher in a meaningful way this year?
Mike?
No, it's something that we've seen over the course of the last four years building up gradually bit by bit. As we continue the pace, which has been a fairly consistent pace, notwithstanding what I just said in the answer to the prior question. Some of the prior intangible amortization from earlier acquisitions start to roll off as we add in new. We would expect it to go up, but only go up modestly.
All right. Thank you.
Okay.
We'll go next to Kai Pan with Morgan Stanley Smith Barney.
Good morning. Thank you for taking my questions. I have a few questions on the margin side. First, on the RIS segments, the margin have improved quite a bit the last few years. You mentioned that the increased spending level, like in the second half of this year. Does that imply the pace of the margin improvement was slowing down for the last two years?
A couple of things. You're correct in noting that the company overall, and RIS in particular, have had a terrific run of margins over the last several years. When you think about the overall company with a margin of 20.9%, and RIS at 27.2%, and consulting at 15.8%, both for RIS and consulting, these are the highest margins in 10 years and 20 years or more respectively. We have been able to drive margins. As I've mentioned in the past, our focus as a leadership team is first growing revenue and earnings, and margin expansion is an outcome of our philosophy of, in almost all quarters, growing revenues at a pace which is greater than growing expenses. Saying all that. In terms of the second quarter, we really didn't say anything about the second half of the year or the next couple of quarters.
We basically said in the second quarter, there would be a blip in RIS expenses, and it's for the reasons that Mike mentioned. There's a blip in RIS expenses. There's a bit of a headwind in terms of foreign exchange within RIS as well. When you look at it overall, we're still very comfortable that we have the ability, over time, to grow margins in both segments. Our overall feelings about RIS is that they've had a few years' head start on our consulting segment. From that standpoint, we think that the pace of margin expansion in RIS in the near and midterm will be slower than the pace that we see in consulting. Having said that, in the long term, both segments have significant expansion opportunities. Mike, do you have anything to add?
Yeah. Let me just go back and restate some recent history and put it into context. As far back as 2007, I think the margins in Risk and Insurance Services were below 9%. I think they were around 8.6%, 8.9%. As you saw a tremendous improvement under the senior management leadership, you saw those margins improve up through 2010 to 19.3%. In 2011, they improved, but only to 19.4%. The question was asked then, is all the margin improvement behind us? Is that it? Do you have to essentially grind it out? Brian Duperreault and Dan said at the time, "No, we have a lot of room for further expansion." You obviously saw that margin go from 19.4% to 20.6% to 22.1%.
Just to reiterate and be very clear what we're saying, we're looking for margin improvement for Risk and Insurance Services this year and beyond. We just wanted to share with you the sequencing of the quarters because it's been built into our business plan, and we wanted to be very clear that you would see probably more growth, in fact, EPS, significantly more growth in the second half of the year, but wanted to make you aware of the nuances of the second quarter.
Very thorough answers. On the buybacks, the $100 million buyback in the first quarter seems a little bit low, considering the run rate for the full-year guidance of $700 million-ish. Is there any particular reason? Because the cash flow in the first quarter or the stock price, any thought there?
Okay. Thanks for the question. Mike?
Yeah, very insightful question because it does have to do with the seasonality of our cash flows. Our cash builds up through the second half of the year and peaks at the end of the year, then in anticipation of the variable compensation programs and payouts that occur at the end of February and early March. You could see that our cash position went down fairly dramatically from where it had been at the end of the year through the end of the first quarter. That notwithstanding, we're very committed to share repurchase, and in the first quarter of last year, we did $100 million, and we felt that it was appropriate to do $100 million in the first quarter this year, even when it was the heaviest quarter of our cash utilization.
Now, with all of that said, and you're absolutely right, we will expect to pick up the pace of that for the remainder of the year.
Thank you so much.
Sure. Next question, operator.
We'll go next to Elyse Greenspan with Wells Fargo.
Hi, good morning. I was hoping to spend a little bit more time talking about just what you're seeing with the economic conditions globally. I know you did mention some improvement in the U.S. when you were talking about that earlier, just as we frame just organic growth expectations within Marsh both in the U.S. and internationally for the balance of the year.
Okay. I'll start, and then I'll hand it over to Scott. One of our enduring advantages is our global footprint. Basically, where there's growth anywhere in the world, we are on the ground, and we will get it. When we look at the world's always a choppy place, right? You're going to have areas of significant growth and area of challenge or modest growth in different parts of the world. When we're looking at the it was kind of interesting when we were all at Davos this year because the U.S. sort of over the last four years has gone from the goat to the hero. The U.S. level of growth, not only in the U.S. but also expansion opportunities around the world, is at a better pace than what we've seen in the last few years.
Although, to be sure, it's not buoyant out there, it feels a lot better than it did three or four years ago. Scott?
Thanks, Dan. I don't have too much to add to my comments before, but let me go a little deeper. We're seeing across the U.S. modest improvements in the economy and at no greater pace than we saw in the first quarter for things to improve. We see this in the Oliver Wyman business, and I think we see this in the rest of the MMC businesses, too, to a certain extent. Business confidence is improving, again, at a modest pace, and the businesses we're involved with seem to be spending more on both continued restructuring and on growth initiatives. As I said before, Europe has been a bit of a surprise. Europe was at a pretty low point. They're coming off it faster than people expected.
The economies are recovering a little faster, very good performance in the U.K., and the politics are a little more stable than everyone expected. All of this is, of course, in the context of Ukraine and a continued, pretty volatile geopolitical environment. There are things that could throw us off track, but we feel pretty comfortable with the U.S. and Europe. Outside those markets, though, we are seeing a lot of volatility. In most of the growth markets in Latin America or in Asia, I won't talk about Russia now, and beyond that, they're more choppy. There's more volatility. We are seeing a reasonably good trend there. We remain mildly optimistic, and I don't have too much more to add than that.
Thanks, Scott. Elyse, any other question?
Yeah. I was hoping you could also just provide us a little bit of an update, what you're seeing with Mercer Marketplace. I guess, when we sit here, it's a little bit ahead of next year's enrollment season, but just kind of a little bit more of a feedback from last year and just some of your expectations as we look forward and you're speaking to clients that are thinking about coming on the exchange for 2015.
Okay, perfect. Julio.
Thank you, Elyse, for the question on Mercer Marketplace. Last time we updated numbers on Investor Day, we had mentioned that there was about 300,000 lives or so that we had already included in our active and retiree space for Mercer Marketplace. Our sales process, as you can imagine, is very robust. Pipeline continues to grow. It's good. We continue to have clients going live on the platform throughout the year, especially our middle-market clients. Given that we are heavily into the sales cycle for this year, we think it's best to probably update towards the beginning or at the end of our largest sales cycle, which is at the end of this year and the beginning of 2015.
You can be assured that the level of dialogue with clients and our prospects around exchanges is very high, I look forward to updating you as the year goes on and towards the beginning of next year. You did mention that you also would like to get some color around some of the things, early information that we've been able to also get from enrollment data that we already established this year. I want to really reiterate that on Investor Day, we talked a little bit about starting to get information out about what we saw in early enrollment process. On balance, we see employees making different choices and buying less medical insurance. Many of them were over-insured, and they're kind of right-sizing the actual plans to their needs.
The result of these choices is an average annual medical cost reduction of about $800 per employee that we're seeing, with employers seeing about $550 of that savings and employees seeing $250. As a reminder, Mercer Marketplace enables employers to gain control over their medical insurance costs, while at the same time offering real value to their employees, and by giving them more choice and control over how they spend healthcare dollars. We'll continue to strive to make sure that there is that differentiated difference for both employees and employers.
Thanks, Julio. Okay, operator, next question.
We'll go next to Brian Meredith with UBS.
Hi. Two questions here. The first one on the consulting side, the slowdown in the health and benefits growth rate, is that something we should expect to continue here going forward, or is this something unusual in the first quarter?
Okay, Julio, you want to take that?
Thank you. A lot of things contributed to softer results. Let me just first say that our broad breadth of business offerings that we have for our clients globally give us an ability to be able to maximize the diversification of where we get our growth. In this particular case, a little bit of a slowdown is helped by other businesses that obviously moves up. The softer results is really our U.S. consumer business. As you can recall, we announced quite some time ago, came over from Marsh. We knew that we would face a tough comparison to last year in the first quarter, and it was anticipated in our plans that we would do so.
Other things like in the U.S., Europe, and Asia, we have been doing a lot of work to restructure and improve the profitability of our book of administration clients as it relates to H&B. In some cases, we ended up with a bit of a lower revenue, with higher margins. In the long run, we think that that'll benefit significantly as we continue to grow both top line and bottom line. It isn't just one thing, a lot of things coming together that result in being a quarter that was a bit softer than we've been running in the past.
Thanks. Brian, your next question?
Yeah. The next question, I guess, more for Peter. If I take a look at the growth that you're seeing in the developed countries, the EMEA and the U.S. business, it looks like it's kind of running in line and maybe below nominal GDP growth. I guess my question is, from Marsh, should we just expect nominal GDP growth as kind of what you guys can grow? Or is there any kind of urgency out there to get the growth picking up here?
Yeah. I'm not sure about the nominal GDP growth in the U.S. in the first quarter, because I saw something the other day that said it was 0.1. On that measure, we're not going to cover off the ball. Peter, do you have some comments?
I agree with you. Brian, the underlying fundamentals of the U.S. and Canada business as well as Europe are quite strong. We have very strong client retention, strong rollover from prior year, meaning that we're retaining the clients that we're adding from prior year for new business. We've had strong new business. Overall, I don't think the 2% is the world we want to live in. We are aspiring to do 3% or more, and think that the underlying fundamentals support that over a longer-term basis. In the U.S., we had a couple of things that hurt us in the quarter with two large programs that are in runoff. Again, not an excuse, but just pointing you towards that the underlying fundamentals, I think, are stronger than the 2%, and we're optimistic in the future.
Thanks, Peter.
Thanks.
Next question, operator.
We'll go next to Thomas Mitchell with Miller Tabak.
Thank you. This is just a little back-of-the-envelope calculation, we started with about $2.20 a share available for various allocations of excess cash and capital in 2013, that's going to go to about $3.60 a share in 2014. I guess one question I have related to that is, can we expect it to stay at that level, are there reasons why it would fall back? Secondly, on a sustained basis, looking out a number of years, would you continue to see the cash flow available for different uses continue to grow, although probably not at a similar pace?
No, it's a good question. Basically, we were looking at 2013 of having cash available for acquisition, share repurchase, and dividends of about $1.2 billion. As we noted earlier, we expect that number for 2014 to be about $2.1 billion. We believe that that kind of level is going to be available to us as we go forward beyond 2014. We also, as we grow the business, both organically and inorganically, we expect to see mild increases in our cash flow as we go forward. That is our expectation where we are today. It's important to know that some of the calls on cash that we had before, whether it was pension or restructuring kinds of things, don't exist right now. In our planning horizon, we're not expecting them to.
The other question I have is sort of related, is that availability of cash flow, and Mike might be able to detail this, is that availability something that has to be moved geographically, or are the opportunities to make use of it in place or are the amounts easily enough transferred that it doesn't matter where it comes from?
I'll start, Tom, then I'll hand over to Mike. In terms of our business, right now about 44% of our business is in the U.S. We have a significant amount of business and profitability outside of the U.S. That being said, that our uses of cash include not only share repurchase and dividends, but also acquisitions. When we look around the world, we see opportunities throughout the world in both segments. I wouldn't make the assumption that all the cash that we have around the world has to come back to the U.S., and that's where good capital management and good cash flow management come in. Mike, you want to-
No, Dan, you're absolutely right. The one pressure that exists for the company is returning capital to shareholders. With the dividends and share repurchases that we indicated, in fact, for this year, I think we said at Investor Day that we're planning about $1.3 billion of capital return to shareholders in the form of share repurchases and dividends. That's obviously all U.S.-oriented. It does mean that over not just this year, but every year and going forward, we have to bring international cash back into the U.S. in a tax-efficient manner to return capital to shareholders. We think we've been able to do that very judiciously in the past, and we think we can do it judiciously going forward.
That's terrific. Thank you very much.
Cheers. Next question, operator.
We'll go next to Meyer Shields with KBW.
Hi, thank you. Just a couple quick ones here. I know you'd mentioned, I think it was at the Investor Day, the potential to add some ancillary products to the exchange platform. I'm just wondering, looking forward, what's the margin potential there? Just trying to get a sense of how accretive that could be.
Okay, Julio, the question's about ancillary products on Mercer Marketplace.
Right. Thank you. As we said back in Investor Day, when we first started with Mercer Marketplace, moving in the direction of having a holistic solution for employers and employees, we started off with ensuring that we had a very good win-win value proposition for employees and employers. We felt one way to be able to do that is to make sure that we gave a very broad breadth of options to employees to choose from. As they choose on their core medical programs, perhaps options of higher deductibles, we wanted to make sure that ancillary products were available for them to fill some of that gap, like with critical illness coverages, accident health coverages, et cetera. We've continued to expand our ancillary product offerings to employees to give them options that perhaps others may not offer in terms of their structure.
We continue to do that. We announced on Investor Day that about 25% of those that took higher deductibles are actually buying ancillary products. That continues to be the case. We continue to see good movement in that direction. We've added, in addition to some of the products I mentioned earlier, now auto and home. That just recently launched, and we don't have any early numbers on that yet, but we'll see how that develops throughout the year and at the beginning of next year. It is our strategy to continue to add and to bring strong decision solution tools to aid people in making decisions as to when they should be using ancillary products to subsidize some of the decisions they're making on core medical.
Okay, great. Thank you. Just quickly, with Oliver Wyman, I know you'd also mentioned some potential cross-sell opportunities there. I'm just wondering if those have come to fruition and to what extent you can benefit from those as well.
Just to make sure that we have the question, were you talking about OW cross OpCo opportunities? Or I'm not sure we heard you clearly.
I was just referring, just in general, to cross-sell opportunities you have between Oliver Wyman and the other MMC businesses.
Let me take that because it's really broader than Oliver Wyman. We have, as you know, two segments and four operating companies within those two segments. When we look at it, there's opportunities to have significant amounts of activity in support of one OpCo for the other, in servicing our clients. It's not specific to Oliver Wyman. Let me give you some examples. Outside the U.S., Mercer and Marsh work jointly on employee benefits. Within the insurance company segment, Guy Carpenter and Oliver Wyman communicate regularly with regard to different types of capabilities that they can bring to insurance companies. Those are just two examples. We would have a list of a dozen.
I'm always wary, though, in a company that produces the kind of business and new business that we have, this is gravy, and this is optimization, making sure that we don't leave anything off the table in servicing our clients and giving them innovation and new opportunities. When we look at our business, not only do we see advantages of being part of Marsh & McLennan Companies and advantages in our intellectual capital, you'll see more of that, you won't see us combining operating companies. We believe in the strength of our present structure and the ability of each operating company to deliver value to clients and seek advice and solutions from the other operating companies as well.
Okay, great. Thank you. That was very helpful.
Okay, cheers. Next question, please.
At this time, there are no further questions. I'd like to turn the call back over to you, sir, for any additional and closing remarks.
Okay. Well, thank you very much, operator, and thank you everybody for joining us on the call this morning. I'd like to thank our clients for their support and our colleagues for their hard work and dedication in serving them. Have a great day. Bye.
Again, that does conclude today's conference. We do thank you for your participation. You may disconnect at this time.