Brian Duperreault, Marsh & McLennan Companies new chief executive, outlined for stockholders today a plan to return the company to profitability that includes cost controls and cuts, divesting some businesses and acquiring others.
Speaking at the annual shareholder meeting, Mr. Duperreault, president and chief executive officer of MMC, called the New York-based services company, the parent of insurance broker Marsh and reinsurance broker Guy Carpenter, "a great company with tremendous potential," but acknowledged that its financial position has not performed "adequately."
For the first quarter of this year, MMC reported that net income dropped $478 million to a loss of $210 million compared to the same period last year. This translated into a loss of 40 cents a share, down 87 cents from the comparative period. Revenues improved 8 percent in the quarter by $235 million to more than $3 billion.
While he has only been on the job about 100 days, he said he has taken several initiatives aimed at regaining profitability, especially at Marsh and Kroll, the company's risk consulting firm.
"Management's role is to repair what is wrong and get us back on the path of success," he said.
He laid out seven objectives for MMC's five companies, which also include the consulting firm's Mercer and Oliver Wyman Group.
Marsh, he said, must return to profitability, calling that priority number one. He credited Daniel S. Glaser, chairman and CEO of Marsh, with simplifying the organizational structure of the firm and improving its financial performance with expense management control.
For the first quarter Marsh reported revenue growth of 7 percent, or $85 million, to $1.23 billion. Organic growth grew by 1 percent.
"We are pleased by this tangible evidence of cost containment but will continue to implement vigorous expense discipline at Marsh in order to achieve even greater long-term margin improvement," said Mr. Duperreault.
"We know there is a lot of work ahead of us at Marsh, but the actions we have taken today have generated positive results."
He said integration plans for Kroll with Marsh never materialized, and after a review of the business he said there are several lines within Kroll that do not fit. MMC will look to divest itself of these businesses, he said, but did not identify the specific businesses.
Guy Carpenter will go through a restructuring, he said, which has already begun with cost reductions under new management. More than 300 positions will be eliminated--about 10 percent of the workforce--translating into annual savings of $40 million.
He said the broker is the "preeminent reinsurance advisor in the United States" and the aim in the future is to make it the preeminent reinsurance advisor in the world.
Attention needs to be paid to its consulting services, Mercer and Oliver Wyman, which will undergo some stress during the U.S. economic slowdown, said Mr. Duperreault.
They account for half of MMC's revenues, and the company must seek a balance between being prepared to take advantage of the economy when it improves and at the same time growing in ways that are prudent, he informed.
Mr. Duperreault said MMC has underinvested in its people and improvements will be needed to attract new talent and retain talented employees.
The company will look at costs at its "corporate center" to determine if greater efficiency is necessary, he noted.
Finally, he is putting MMC on a path of organic growth and growth through acquisition. He signaled that no acquisition should be considered too small, but at the same time the company should be willing to get rid of anything that doesn't work.
"We still have a lot of work ahead of us, but I'm optimistic about the future," Mr. Duperreault concluded.
MMC today announced that it would pay a quarterly dividend of 20 cents per share on Aug. 15 to shareholders of record as of July 8.
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