Marsh & McLennan reported second-quarter net income decreased 63 percent compared with the period last year, and the firm said it will eliminate 900 positions at its Marsh insurance brokerage unit.

The income drop was attributed primarily to a goodwill impairment charge and loss in investment income. MMC said all lines of business had increases in organic growth and overall revenue increased 9 percent.

New York-based MMC, which is also the parent company of Guy Carpenter reinsurance brokerage, said second-quarter net income dropped $112 million from the same period last year to $65 million. Earnings per share dropped 18 cents a share to 13 cents. Revenues increased 9 percent, or $263 million, to $3.04 billion.

For the first half of the year, net income compared to last year is off 133 percent, or $590 million, for a loss of $145 million. Earnings per share dropped 51 cents a share to a loss of 28 cents a share.

MMC recorded a goodwill impairment charge (an accounting revaluation of an acquired property) for the risk consulting and technology segment of $115 million in the quarter and $540 million for the six months, which adversely affected results.

The company also recorded a $16 million loss in the quarter and $8 million loss for the first half, on investment income from write-downs.

Revenues at Marsh grew 8 percent in the quarter, or $87 million, to $1.2 billion. The broker also recorded organic growth of 3 percent.

The firm's Asia Pacific segment showed the strongest performance with revenue growth of 18 percent, climbing $19 million to $124 million. MMC said the unit had 8 percent organic growth.

Total international revenue grew $76 million, or 14 percent (5 percent organic), to $627 million.

Slumping prices in the soft market limited United States and Canada revenue growth to 2 percent, rising from $573 million to $584 million.

Reinsurance broker Guy Carpenter saw revenues fall in the quarter to a loss of 6 percent, going from $217 million to $204 million.

In other segments for the quarter, consulting revenues from Mercer and Oliver Wyman Group rose 13 percent, or $156 million, to $1.4 billion. The risk consulting and technology segment, primarily Kroll, rose 13 percent, or $32 million, to $281 million.

Brian Duperreault, president and chief executive officer of MMC, said during an analyst's conference call that the results were "excellent" and that Marsh's recovery "is picking up speed."

"We are excited about the future," he said.

In an analyst's note from Bank of America Securities' Alain Karaoglan, Marsh beat consensus earnings per share estimates on continuing operations by 6 cents a share, rising to 41 cents a share. Revenue growth exceeded expectations, he said, crediting Mr. Duperreault with "taking the right initial steps" to improve earnings.

Daniel S. Glaser, chairman and CEO of Marsh, told investors that in eliminating positions--most of them in the United States--the firm plans to outsource 200 positions and eliminate 100 through attrition.

The remaining 600 would be layoffs as the broker shifts from a centralized model to a placement hub model where placements will be made through regional offices.

The cuts will come from the corporate, back office operations and non-client facing areas, he said. The change in the business model is expected to lower costs and Marsh's errors and omissions exposure, said Mr. Glaser.

While Marsh has seen improvement, Mr. Glaser said, "we still have a long way to go before we can say our business is where we want it to be. The market continues to be challenging and we still have a lot of work to create a more disciplined sales and growth oriented culture that will drive more consistency in our top line results."

The layoffs come after more than 300 positions were eliminated this year at Guy Carpenter. Mr. Glaser said a total of 360 positions were eliminated on the brokerage side of the business in the second quarter and an additional 150 positions in the first quarter, costing $36 million so far this year, and the action is expected to save $45 million annually.

Between Marsh, Guy Carpenter and outsourcing, MMC has eliminated at least 1,410 positions so far this year, not including the 900 more announced today.

Special Reports /

Marsh To Cut 900 Jobs, As MMC 2Q Net Drops 63%

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