Analysts Express Comfort in MMC’s Succession Plan

A number of analysts have issued favorable comments for Marsh & McLennan Cos.’ Chief Executive Officer Brian Duperreault and his successor, Chief Operating Officer Dan Glaser, who was officially designated by the company on Sept. 20 to take over the CEO post when Duperreault retires at the year’s end.

Keith Walsh, an insurance sector analyst at Citi Equity Research, called Duperreault’s planned retirement “Going out on top” and described the succession plan as “DiMaggio to Mantle.”

Walsh said in a note to investors that Glaser’s ascension to the CEO post has been expected following his promotion to the COO position 17 months ago.

“Last time Duperreault promoted someone to COO was Evan Greenberg of ACE in June 2003,” he wrote. “Evan became CEO nine months later as Duperreault became chairman.”

Losing someone like Duperreault is a negative, he said. But Walsh said COO Glaser is clearly up to the task, having earned this position over the last four-plus years. In addition to Glaser, he also said Marsh CEO Peter Zaffino helped drive Marsh/Guy Carpenter margins from 8.6 percent in 2007 to 19.9 percent in trailing four quarters despite headwinds from pricing, the economy, interest rates, and pension expense.

Commenting on Duperreault’s accomplishments, Walsh credited Duperreault’s tenure with successfully re-establishing profitability.

“But more importantly,” he said, “and less recognized is the legacy litigation clean-up, implementation of liability caps in both brokerage and consulting units, the sale of Kroll, and the streamlining with strong operating unit heads. In addition, Marsh & McLennan has its lowest level of net debt in at least a decade.”

Besides numbers, he also wrote, “we will remember other contributions — building a strong team that he allowed to shine, navigating through the financial crisis, and re-establishing the organization’s confidence after it had been crippled in the Spitzer contingent commission scandal.”

Speculating on Duperreault’s future, analyst Walsh said that after three successful stops — 20 years at AIG, then 10 leading ACE as CEO, and five as Marsh & McLennan CEO — “we would not rule out an Act IV down the road. However, we would rule out any direct distribution competitor of Marsh & McLennan.”

Duperreault has been with Marsh & McLennan since 2008, having previously guided Ace Ltd. to become a global multi-line insurance and reinsurance company. Duperreault was brought in to Marsh & McLennan to help lead the company’s turnaround in the aftermath of a costly bid-rigging scandal.

Another analyst, Mark Dwelle from RBC Capital Markets, observed that Duperreault’s decision to retire is not a big surprise to investors, given his age — he’s 65 years old — and considering he has largely been grooming Glaser to take over the CEO reins. Dwelle said that while Duperreault played a big role in resurrecting Marsh & McLennan following a difficult 2004-2007 period, Glaser was also “a big architect of the turnaround.”

In particular, he noted, Glaser ran Marsh & McLennan’s Marsh division — the company’s biggest unit — for more than three years, significantly improving margins, attracting top talent, and returning the unit to peer-leading organic growth rates. Glaser was a senior executive at AIG before joining Marsh & McLennan in 2007.

Dwelle added, “The Street could take some comfort knowing that a proven manager like Mr. Glaser (52 years old) could be in place for years to come.”