Marsh & McLennan Companies reported today that 2006 fourth-quarter net income soared more than 500 percent and management expressed optimism about future results.
"We have increased revenue, increased margin and increased our profit. I don't think it is going out on a limb to say that we're confident about 2007. We plan to do the same kind of things. We are optimistic about the future," said Michael Cherkasky, MMC president and chief executive officer in New York.
Fourth-quarter net income increased $191 million, from $35 million to $226 million. That translated into a net income per share increase of 34 cents, going from 6 cents a share to 40 cents.
Revenues increased 9 percent, or $252 million, from $2.8 billion to $3.06 billion in the quarter helped by growth in service revenue and investment income.
For the year, net income rose $586 million, from $404 million to $990 million. Net income per share rose $1.02, from 74 cents a share to $1.76. Revenues rose 3 percent, or $343 million, from $11.6 billion to $11.9 billion.
Mr. Cherkasky said that MMC has seen its largest revenue growth in three years as its restructuring to a leaner, more efficient operation has taken root.
He was particularly buoyed by the results at Marsh, the company's insurance brokerage firm, which showed a 3 percent growth in revenues after excluding the loss of contingent commissions.
Both Mr. Cherkasky and MMC Chief Financial Officer Matthew B. Bartley noted that Marsh has improved retentions significantly. Mr. Cherkasky said the expectation is that Marsh will be able to keep its retentions at "historical soft market levels" through 2007.
The CEO noted that this is the first time MMC has managed to grow its revenues and at the same time keep expenses under control. Expenses were down 1 percent in the quarter.
For the quarter, Marsh's revenues were off 1 percent, while revenues for the company's reinsurance broker, Guy Carpenter, rose 9 percent.
The risk consulting and technology business, Kroll, rose 12 percent.
Consulting, Mercer, rose 15 percent.
The company's investment business, Putnam, was flat. Putnam is being sold to Canada-based Great-West Lifeco Inc. for $3.9 billion. MMC said Putnam will be classified as a discontinued operation in 2007.
In response to a question about the reinsurance business, Mr. Bartley said that recent legislative changes allowing Florida's state-created residual market carrier, Citizens Property Insurance Corporation, to offer reinsurance may not have much of impact.
He said a lot of it will depend on what regulations are written and how that eventually affects business overall. It will not be until June, with July renewal business, that the impact becomes clear.
"[We] don't see a significant down side to our business as a result of the legislation," he said.
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