After making some tough choices Marsh & McLennan Companies is on the road to improvement that will translate into growth over the long term the services firm's chief executive said.
Speaking today at the New York-based company's annual shareholders meeting Michael Cherkasky, president and chief executive officer, said when faced with a decision to continue the status quo or make changes the company has changed to meet the challenge.
"We made a series of conscious choices that the risk was worth the trade-off and we have created substantial, substantive shareholder value," explained Mr. Cherkasky.
Mr. Cherkasky said earnings are expected to grow on average by 5 percent over the next three years and earnings per share are to rise into the mid-teens during that period.
He said decisions the company has made are a balance between the short term interest of shareholders and the long term interest of MMC to ensure success for the future.
To address shareholders concerns, he said, the company has increased annual dividend payment by 12 percent, from 68 to 76 cents per share. He also pointed to the announced accelerated $500 million share buy back program in advance of the money the firm will receive for the sale of its Putnam investment unit.
MMC is selling the unit to Great-West Lifeco Inc., a financial services holding firm controlled by Canada-based Power Financial Corp. for $3.8 billion.
He predicted that MMC will make continued progress in improving its earnings, which took a severe hit after the firm was sued by former New York Attorney General Eliot Spitzer over steering and bid rigging in the placement of insurance contracts. The company settled the case out of court without admitting guilt, but agreeing to change business practices and to pay customers $850 million.
Mr. Cherkasky noted that the company has had to make other changes to survive and grow for the future.
At Marsh, the firm segmented its clients to give large clients "broader and deeper risk analysis" while giving its middle and small commercial market clients "a more focused and efficient service."
To accomplish this the firm divided 12,000 client accounts and 1,500 colleagues, improved technology, and replaced one-third of its office heads throughout the United States over the last six months at 10 of its largest offices. He said the change cost thousands of employee hours and millions of dollars over 18 months.
"We have not implemented those changes perfectly; no one ever does," said Mr. Cherkasky. "But we are confident that the short term changes will give us sustainable, incremental shareholder value."
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