Marsh & McLennan Companies Inc. reported third-quarter netincome of $221 million despite declining revenues in most segments,with its CEO citing the work of top executives to generate newbusiness in a tough economy while tightening expense controls.

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The third-quarter profit, coming out to 41 cents per share,represents a stark turnaround from a net loss for the same periodlast year of $8 million, or 2 cents per share.

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The third-quarter profit was posted despite an 11 percent dropin revenues, which fell $296 million to $2.5 billion.

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“MMC's third-quarter performance was very strong,” said BrianDuperreault, the company's president and chief executive officer,during a conference call with financial analysts.

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“While the economic environment continues to be challenging,MMC's results reflect the effective management actions taken by ourbusiness leaders over the past year, including significant expensereduction,” according to Mr. Duperreault.

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For the first nine months, net income has turned around from anet loss last year of $153 million (30 cents per share), to netincome this year of $204 million (38 cents per share). Revenues forthe first three quarters dropped 13 percent, down $1.12 billion to$7.76 billion.

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Looking at the firm's various segments:

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o The Marsh brokerage unit saw revenues decline in the thirdquarter by 5 percent, down $51 million to $989 million. For thefirst nine months, revenues were off 7 percent, down $251 millionto $3.2 billion.

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o The Guy Carpenter reinsurance brokerage unit posted the bestperformance in the company, reporting third-quarter revenue gainsof 13 percent–up $26 million to $223 million. Nine-month revenuesrose 11 percent, up $74 million to $731 million.

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o MMC's Consulting segment, which includes Mercer, saw revenuesfall 14 percent, down $184 million to $1.14 billion for thequarter, and shrink by 16 percent, or $627 million, to $3.37billion for the first nine months.

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“The consulting segment continued to be affected by thedifficult economic environment,” according to Mr. Duperreault,while adding that “Mercer's decline in underlying expenses matchedthe percentage decline in its revenue.”

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o MMC's Risk Consulting and Technology unit, which includes itsKroll subsidiary, saw revenue drop 27 percent, down $65 million to$170 million for the quarter, and down 33 percent for the firstnine months, dropping $245 million to $498 million.

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However, “Kroll reported its best quarter of the year, withsequential increases in both revenue and profitability,” accordingto Mr. Duperreault. “The improvement was driven primarily byKroll's largest business–litigation support and data recovery–whichreported a modest increase in underlying revenue.”

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Overall, Mr. Duperreault said Marsh was able to accomplish areturn to profitability despite a tough economy and decliningrevenues because management at Marsh has improved efficiency,brought in “strong new business and improved colleague morale.” AtGuy Carpenter, he added, management has improved retentions,brought in new business and paid great attention to expensemanagement.

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The performance at Marsh, where the operating margin hasimproved to more than 18 percent, is all the more impressive in theface of the current economic crisis and soft market, he said.

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On the acquisition front, Mr. Duperreault said the company willcontinue to make deals when it deems them to be favorable andadvantageous to the company.

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He said Marsh & McLennan Agencies–its mid-market brokeragearm–is gearing up to announce several acquisitions near year's endto create a “hub and spoke” operation in select geographicregions.

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The agencies will provide commercial property and casualtyinsurance, directors and officers liability, surety, employeebenefits and personal lines products through a dedicated line andservice force, he added.

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Marsh & McLennan Agencies, established last year, has takenthis long to announce acquisitions because of “the measuredapproach we have taken to build” the unit, Mr. Duperreault said,making sure the acquisition candidates meet MMC's requirementsregarding “quality, cultural compatibility, consistent businessapproach and, lastly, pricing.”

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