Marsh Reports Q3 Loss

November 5, 2008

Marsh & McLennan reported an $8 million loss in the third quarter. For the third quarter last year, when it sold Putnam Investments, MMC reported net income of $1.9 billion.

The company said it is pleased with the performance of its insurance broker Marsh, which reported a 3 percent revenue increase and strong client retention.

In the quarter, MMC’s consolidated revenue was $2.8 billion, up 5 percent from the third quarter of 2007. Revenue growth was 2 percent.

MMC’s income in the third quarter of 2008, net of tax, was $18 million, compared with $80 million last year. Third quarter 2008 results include an increase in professional liability reserves of $33 million due to a recent adverse decision affecting Marsh.

Insurance
Third quarter revenue for MMC’s Risk and Insurance Services — which includes both insurance broker Marsh and reinsurance intermediary Guy Carpenter– was $1.3 billion, an increase of 1 percent from the third quarter of 2007. The operating loss in the third quarter of 2008 was $28 million, including charges for professional liability reserves of $33 million. In the third quarter, adjusted operating income increased to $69 million from $5 million last year, due to Marsh’s improved operating performance.

Insurance broker Marsh’s revenue in the third quarter was $1.1 billion, an increase of 3 percent from last year. The strongest underlying growth was in Asia Pacific, with 11 percent growth.

The company said Marsh’s client revenue retention in the quarter improved on a year-over-year basis, continuing the trend seen throughout the year.

Reinsurance premium rates continued to decline globally in the third quarter across most coverages, with clients’ risk retention levels remaining high. Guy Carpenter’s third quarter revenue declined 9 percent to $205 million, compared with the prior year’s quarter. But the company said restructuring efforts and cost discipline have allowed Guy Carpenter’s profitability to remain unchanged compared with the third quarter of 2007.

Consulting
Third quarter revenue for MMC’s Consulting — which includes Mercer and Oliver Wyman — grew 9 percent to $1.3 billion in the third quarter of 2008. Operating income was $157 million, an increase of 6 percent from $148 million in the third quarter of 2007. For the first nine months of 2008, segment revenue grew 12 percent to $4 billion.

Risk Consulting and Technology
Third quarter revenue for MMC’s Risk Consulting and Technology segment, which includes Kroll, declined 2 percent to $254 million in the third quarter of 2008. Operating income was $28 million, compared with $29 million in the prior year’s quarter. For the first nine months of 2008, segment revenue grew 7 percent to $792 million.

Investment Loss
MMC had an investment loss in the third quarter of 2008 of $23 million, which it said was primarily due to mark-to-market declines in private equity investments.

“I am pleased with MMC’s solid performance, not only in the third quarter but also throughout the year,” said Brian Duperreault, president and chief executive officer of MMC. “Results for the quarter were driven by continued improvement at Marsh. Guy Carpenter’s alignment of expenses with revenue levels enabled it to maintain profitability on a year-over-year basis. Mercer reported excellent performance, with strong revenue growth across its businesses as well as margin improvement and increased profitability. Oliver Wyman had a difficult quarter due to adverse economic and financial market conditions. Kroll’s growth in profitability was driven by its risk mitigation and litigation support businesses.”

Source: MMC
www.mmc.com

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