Segment Information

6 Months Ended

Jun. 30, 2011


18.	SEGMENT INFORMATION

During the periods presented, the Company operated through three segments: Global, North America and International. Global provides specialist brokerage and consulting services to clients worldwide for specific industrial and commercial activities and is organized by specialism. North America and International predominantly comprise our retail operations which provide services to small, medium and major corporates, accessing Global’s specialist expertise when required.

The Company evaluates the performance of its operating segments based on organic revenue growth and operating income. For internal reporting and segmental reporting, the following items for which segmental management are not held accountable are excluded from segmental expenses:


	(i)	costs of the holding company;

	(ii)	foreign exchange loss from the devaluation of the Venezuelan currency;

	(iii)	foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset and foreign exchange gains and losses from currency purchases and sales;

	(iv)	amortization of intangible assets;

	(v)	gains and losses on the disposal of operations;

	(vi)	significant legal and regulatory settlements which are managed centrally; and

	(vii)	costs associated with the 2011 Operational Review.

The accounting policies of the operating segments are consistent with those described in Note 2 — Basis of Presentation and Significant Accounting Policies to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. There are no inter-segment revenues, with segments operating on a revenue-sharing basis equivalent to that used when sharing business with other third-party brokers.

Effective January 1, 2011, the Company changed its internal reporting structure: Global Markets International, previously reported within the International segment, is now reported in the Global segment. In addition, Mexico Retail, which was previously reported within the International segment, is now reported in the North America segment. Comparative data have been adjusted accordingly.

Selected information regarding the Company’s operating segments is as follows:


	Three months ended June 30, 2011
														Interest in
									Depreciation					Earnings of
	Commissions		Investment		Other		Total		and		Operating			Associates,
	and Fees		Income		Income		Revenues		Amortization		Income			net of tax
	(millions)

Global	$	271	$	3	$	—	$	274	$	5	$	89		$	—
North America		326		1		1		328		3		61			—
International		257		4		—		261		10		56			(3	)

Total Retail		583		5		1		589		13		117			(3	)

Total Operating Segments		854		8		1		863		18		206			(3	)
Corporate and Other⁽ⁱⁱ⁾		—		—		—		—		18		(49	)		—

Total Consolidated	$	854	$	8	$	1	$	863	$	36	$	157		$	(3	)


	Three months ended June 30, 2010⁽ⁱ⁾
														Interest in
									Depreciation					Earnings of
	Commissions		Investment		Other		Total		and		Operating			Associates,
	and Fees		Income		Income		Revenues		Amortization		Income			net of tax
	(millions)

Global	$	249	$	2	$	—	$	251	$	5	$	87		$	—
North America		328		5		—		333		6		68			—
International		212		3		—		215		5		41			(2	)

Total Retail		540		8		—		548		11		109			(2	)

Total Operating Segments		789		10		—		799		16		196			(2	)
Corporate and Other⁽ⁱⁱ⁾		—		—		—		—		21		(27	)		—

Total Consolidated	$	789	$	10	$	—	$	799	$	37	$	169		$	(2	)


⁽ⁱ⁾		Effective January 1, 2011, the Company changed its internal reporting structure: Global Markets International, previously reported within the International segment, is now reported in the Global segment. In addition, Mexico Retail, which was previously reported within the International segment, is now reported in the North America segment. As a result of these changes, second quarter 2010 revenues of $36 million, previously allocated to our International segment, have been included in Global: $34 million; and North America: $2 million. Operating income of $18 million previously allocated to our International segment has been included in Global: $18 million; and North America: $nil.

⁽ⁱⁱ⁾		Corporate and Other includes the following:


	Three months ended
	June 30,
	2011			2010
	(millions)

Amortization of intangible assets	$	(17	)	$	(21	)
Foreign exchange hedging		1			(2	)
Foreign exchange on the UK pension plan asset		—			2
Net gain on disposal of operations		—			(2	)
2011 Operational Review		(18	)		—
FSA regulatory settlement		(11	)		—
Other^(a)		(4	)		(4	)

Total Corporate and Other	$	(49	)	$	(27	)


^(a)		Other includes $6 million of the $9 million total benefit in second quarter 2011 from the release of funds and reserves related to potential legal liabilities.


	Six months ended June 30, 2011
														Interest in
									Depreciation					Earnings of
	Commissions		Investment		Other		Total		and		Operating			Associates,
	and Fees		Income		Income		Revenues		Amortization		Income			net of tax
	(millions)

Global	$	629	$	6	$	—	$	635	$	9	$	264		$	—
North America		682		3		1		686		10		146			—
International		543		7		—		550		15		142			13

Total Retail		1,225		10		1		1,236		25		288			13

Total Operating Segments		1,854		16		1		1,871		34		552			13
Corporate and Other⁽ⁱⁱ⁾		—		—		—		—		39		(157	)		—

Total Consolidated	$	1,854	$	16	$	1	$	1,871	$	73	$	395		$	13


	Six months ended June 30, 2010⁽ⁱ⁾
														Interest in
									Depreciation					Earnings of
	Commissions		Investment		Other		Total		and		Operating			Associates,
	and Fees		Income		Income		Revenues		Amortization		Income			net of tax
	(millions)

Global	$	580	$	5	$	—	$	585	$	9	$	241		$	—
North America		693		8		—		701		12		161			—
International		479		6		—		485		10		128			18

Total Retail		1,172		14		—		1,186		22		289			18

Total Operating Segments		1,752		19		—		1,771		31		530			18
Corporate and Other⁽ⁱⁱ⁾		—		—		—		—		42		(60	)		—

Total Consolidated	$	1,752	$	19	$	—	$	1,771	$	73	$	470		$	18


⁽ⁱ⁾		Effective January 1, 2011, the Company changed its internal reporting structure: Global Markets International, previously reported within the International segment, is now reported in the Global segment. In addition, Mexico Retail, which was previously reported within the International segment, is now reported in the North America segment. As a result of these changes, first half year 2010 total revenues of $70 million, previously allocated to our International segment, have been included in Global: $65 million; and North America: $5 million. Operating income of $34 million previously allocated to our International segment has been included in Global: $34 million; and North America: $nil.

⁽ⁱⁱ⁾		Corporate and Other includes the following:


	Six months ended
	June 30,
	2011			2010
	(millions)

Amortization of intangible assets	$	(34	)	$	(42	)
Foreign exchange hedging		2			(6	)
Foreign exchange on the UK pension plan asset		1			6
Net gain (loss) on disposal of operations		4			(2	)
2011 Operational Review		(115	)		—
FSA regulatory settlement		(11	)		—
Venezuela currency devaluation		—			(12	)
Other^(a)		(4	)		(4	)

Total Corporate and Other	$	(157	)	$	(60	)


^(a)		Other includes $6 million of the $9 million total benefit in second quarter 2011 from the release of funds and reserves related to potential legal liabilities.

The following table reconciles total consolidated operating income, as disclosed in the operating segment tables above, to consolidated income before income taxes and interest in earnings of associates:


	Three months ended						Six months ended
	June 30,						June 30,
	2011			2010			2011			2010
	(millions)

Total consolidated operating income	$	157		$	169		$	395		$	470
Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs		—			—			(171	)		—
Interest expense		(34	)		(41	)		(74	)		(84	)

Income before income taxes and interest in earnings of associates	$	123		$	128		$	150		$	386