MMC Says 1Q Net Income Up, Despite Revenue Loss

NU Online News Service, May 6, 2:10 p.m. EDT

Marsh & McLennan Companies Inc., the parent company of insurance broker Marsh and reinsurance broker Guy Carpenter, reported net income of $176 million, despite a 13 percent drop in revenues compared to last year.

The New York-based services firm reported net income in the first quarter rose from net loss of $210 million, or negative 40 cents a share last year, to net income of $176 million, or 33 cents a share. Revenues dropped $410 million, from $3.04 billion to $2.63 billion.

MMC's President and Chief Executive Officer Brian Duperreault said during a conference call with analysts that, "Overall, I am pleased with our first quarter results."

He said the results were achieved despite "significant hurdles" the firm faced over the period. He credited margin improvement in the risk and insurance business for the positive results.

Mr. Duperreault said that 2007 risk and insurance adjusted margin was 8.6 percent. Underscoring the improvement for the past four quarters, he said the firm's adjusted margin now stands at 15.1 percent, and he forecasted the adjusted margin would improve to 17 percent for this year.

Guy Carpenter's new business growth resulted in first quarter revenues increasing 7 percent, or $17 million, to $281 million from the same period last year. Organic growth rose 10 percent in the period.

Mr. Duperreault said the reinsurance broker's new business growth was the highest in 10 years. He also said cost reductions at the firm contributed to earnings.

Marsh did not fare as well in the quarter, reporting revenues dropped 10 percent, or $120 million, to $1.08 billion. Organic growth fell 1 percent.

The combination of soft market pricing, economic downturn affecting client purchases and restructuring costs contributed to the brokers decline.

MMC's other two segments, consulting (which includes Mercer and Oliver Wyman Group), and risk consulting and technology (which includes Kroll) also reported revenue declines.

Consulting fell 16 percent, or $212 million, to $1.08 billion, and risk consulting and technology dropped 27 percent, or $70 million, to $187 million.

Both segments are continuing to battle headwinds from the economic downturn and are going through business restructuring, Mr. Duperreault said.

Daniel S. Glaser, chairman and CEO of Marsh said in response to a question about Marsh's earnings that many customers are making buying decisions based on the current economic climate, delaying insurance buying decisions, or cutting back insurance services. The firm also walked away from a consulting arrangement that he said was "underpriced."

He also touched on MMC Agency Markets, the agency business aimed at mid-sized market accounts and start-up businesses. He said no acquisitions have been made, but that there are plenty of accounts in the pipeline. He said the unit remains in the prospecting mode.

Peter Zaffrino, president and CEO of Guy Carpenter, said the recent acquisition of reinsurance broker John B. Collins Associates Inc. is aimed at strengthening its brokerage position in the United States. It will especially help regionally from its base in Florida and in other lines, such as medial professional liability and agriculture.

The completion of the deal was announced earlier this month. The firm has revenues of $69 millions, an executive said during the conference call.