Soft market pressures made it challenging for the world's four largest insurance brokers to post profits for fourth-quarter 2007, with the quartete all reporting little organic growth and drops in net income compared to the same period in 2006.

o Marsh & McLennan Companies, the parent company of insurance broker Marsh and reinsurance broker Guy Carpenter, reported a 62 percent drop in its net income as soft market pressures and losses in investments weighed heavily on its performance.

Still, Marsh managed a 1 percent increase in organic growth, while Guy Carpenter's organic growth fell 2 percent.

o Aon Corp. reported that fourth-quarter net income dropped 7 percent, putting its earnings-per-share about in line with analysts' estimates after considering the fact that the broker repurchased less stock than anticipated and had increases in expenses related to growth.

o Willis Group Holdings Limited said net income fell 36 percent in the fourth quarter but managed to beat analysts' earnings-per-share estimate by 7 cents per share.

o Arthur J. Gallagher said it is cutting staff and selling its reinsurance brokerage unit as it reported a 5 percent drop in fourth-quarter net income for 2007.

New York-based services firm MMC reported fourth-quarter net income of $85 million, a drop of $141 million from the same period in 2006.

Earnings per share fell 24 cents to 16 cents per share from 40 cents per share in fourth-quarter 2006.

However, fourth-quarter revenues rose 8 percent, or $218 million, to $2.9 billion.

For the year, net income increased 150 percent, or $1.5 billion, to $2.5 billion, which translated into $2.77 increase in earnings per share to $4.53.

Full-year revenues rose 8 percent, or $803 million, to $11.4 billion.

Insurance results were called weak by one executive, with fourth-quarter revenues from risk and insurance services virtually unchanged at $1.4 billion. Fourth-quarter consulting revenues grew 19 percent to $1.3 billion.

Within the risk and insurance services segment, the brokerage unit Marsh reported increasing fourth-quarter revenues by 6 percent, or $66 million, to $1.2 billion. The quarter's new business growth was the best since the first quarter of 2003 when the industry was in the middle of a hard market cycle, executives said.

Despite the soft market, Marsh increased organic growth by 1 percent in the quarter, but dropped 1 percent for the year.

Reinsurance broker Guy Carpenter suffered a 2 percent decline in revenue, or $4 million, to $167 million. The results were attributable to a combination of soft market conditions and traditional light renewals during the fourth quarter.

For MMC overall, investment income fell 90 percent, or $66 million, to $8 million for the quarter on the revaluation of investments, and an executive said that segment would continue to be volatile in the future.

Rounding out the revenue picture, in addition to the 19 percent jump for the consulting division, fourth-quarter revenue for the risk consulting and technology unit, Kroll, grew 3 percent, or $8 million, to $249 million.

Results were also affected by $14 million in expense related to the departure of Michael Cherkasky, the former president and chief executive officer of MMC, who was replaced by Brian Duperreault on Jan. 29. MMC would not elaborate on the nature of the expense.

Bear Stearns analyst David Small said in a research note that the brokerage results were in line with estimates, but that Kroll was a disappointment. He said Marsh has discontinued many of the initiatives begun by the old management and this has affected earnings in a positive way.

Alain Karaoglan, an analyst for Bank of America, gave MMC's performance mixed reviews in his note, saying revenues were disappointing in brokerage and Kroll, but overall revenues exceeded expectations.

During an analyst's conference call, Mr. Duperreault said he would closely examine the position of Kroll within MMC and did not rule out a sale or spin-off of the unit.

"I'm not trying to signal that Kroll is for sale," he said in answer to a question. "I am saying that I am looking at Kroll and am looking at it in-depth."

About MMC, he said mistakes were made in the past, but he is confident in the underpinnings of the company and that "its problems are not systemic." It will take time to find solutions, he said, but he emphasized that his aim is to grow the company, not see it diminished.

Mr. Duperreault made it clear that Daniel S. Glaser, the chairman and CEO of Marsh, who was hired in December, would be firmly in control of making the necessary changes to bring the broker back to profitability.

Addressing Marsh's future, Mr. Glaser said the major problem with the firm is "we don't make enough money," and the way to correct it is to get back to basics.

He said this would be done by simplifying processes and changing brokering operations from centralized command to a hub system of brokerage offices. He added that there would also need to be reductions in costs and expenses to be accomplished through elimination of unnecessary spending.

Fourth-quarter net income for Aon fell $16 million to $207 million, with the drop primarily attributable to increased expenses in new hires and other growth investments.

Net income per share stood at 69 cents, a loss of 3 cents per share compared to fourth-quarter 2006.

Revenues in the quarter rose 8 percent, or $152 million, to $2.0 billion.

Net income for the year rose 20 percent compared to 2006, or $144 million, to $864 million. On a per-share basis, earnings rose 63 cents for the year to $2.90 per share.

Full-year revenues rose 9 percent, or $590 million, to $7.5 billion.

Bear Stearns' Mr. Small said the company's results for the quarter beat Wall Street estimates by 3 cents per share, and were 4 cents better than his firm's estimates. However, calculating the fact that Aon repurchased less stock than anticipated and invested in areas of growth and expense, then Aon's earnings were in line with expectations.

Organic growth was 2 percent for the quarter and 3 percent for the year.

Greg Case, Aon's president and CEO, said the firm would not use "soft-market pricing as an excuse" for not growing its book of business, but instead would continue to grow despite the pricing obstacles. He said Aon is continuing to invest in itself, including new hires, and at the same time grow margins.

"Aon is in build mode," he said, adding later, "We are nowhere near what we are capable of doing."

London-headquartered Willis reported its net income in the fourth quarter dropped $53 million to $95 million compared to the same period in 2006, translating into earnings per share of 66 cents, or a 28 cent decline.

Fourth-quarter revenues rose 3 percent, or $18 million, to $639 million.

For the year, net income was off 9 percent, or $40 million, dropping to $409 million. Earnings per share were down 6 cents, coming in at $2.78 per share for 2007.

Full-year revenues rose 6 percent, or $150 million, to $2.6 billion.

On the organic growth side, both the North America and global divisions suffered 7 percent declines, while Willis' international division reported 9 percent growth.

Overall, commissions and fees were up 3 percent and investment income rose 4 percent in the quarter.

For the year, organic growth in commissions and fees rose 3 percent.

Joe Plumeri, Willis' chairman and CEO, said that performance in North America was affected by the closing of unprofitable offices and the release of underperforming brokers. He said the segment is back on track and will show positive earnings in the first quarter of 2008.

The broker's reinsurance segment was affected by a combination of historically light earnings that occur in the fourth quarter, rate softening, increased retentions by insurance companies, and the effects of Florida's creation of a state reinsurance program, Mr. Plumeri said.

The reinsurance segment has not lost clients and should witness positive income growth in first-quarter 2008 as some clients begin to purchase more reinsurance, he said.

The company said it anticipates taking a $60-to-$90 million charge in the first quarter of 2008 for cost savings opportunities. The charge will lead to $20-to-$40 million in annual savings in 2008, which will rise in 2009.

Mr. Plumeri said the charge resulted from an ongoing search to find cost savings within the company and was not in reaction to soft market conditions.

Itasca, Ill.-based Gallagher reported that net income in the fourth quarter of 2007 dropped $1.2 million to $23.4 million compared to $24.6 million for the same period in 2006. Earnings per share remained flat at 25 cents per share.

Revenues during the quarter rose 3 percent, or $11.3 million, to $410 million.

For the year, Gallagher reported net earnings rose 8 percent, or $10.3 million, to $139 million. Full-year earnings per share rose 12 cents to $1.43.

Full-year revenues were up 10 percent, or $153 million, to $1.6 billion.

In response to soft market pressures, reflected by zero percent organic growth in the insurance brokerage segment, Gallagher said it was taking actions to help build its margins.

The company intends to eliminate 400 back-office positions and sell its reinsurance brokerage business. The job cuts will come from attrition and outsourcing.

J. Patrick Gallagher Jr., chairman, president and CEO, said the firm would "be very, very careful in hiring replacements" and that this move along with expense controls would help produce a strong 2008.

He said the market is the softest it has been since the late 1990s, and despite the fourth year of softening, the retail business performed well in the quarter.

Wholesale brokerage, however, was challenged by the loss of excess and surplus lines business moving out to retail and large property accounts down 10 percent or more.

There is the added burden of new hires, who have yet to begin producing, he said.

Mr. Gallagher said the sale of the reinsurance business was made after careful consideration and the realization that the firm would be unable to bring the unit up to scale to make it competitive without tremendous investment.

"It was a tough decision, but it will allow us to concentrate on our core business," said Mr. Gallagher.

Bear Stearns' Mr. Small applauded the move to sell the reinsurance business and said the company is finally acting to reduce costs and increase margins with the trimming down of its workforce.

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