Marsh & McLennan Cos Inc., the second-largest global insurance broker, posted a first-quarter profit on Wednesday, reversing a year-earlier loss, as lower costs helped offset a decline in revenue.
Chief Executive Brian Duperreault said he expects revenue in the main brokerage business to grow modestly throughout the year, and the company expects to use acquisitions to boost growth, both in the United States and internationally.
Marsh, whose shares were up 6.7 percent, said revenue in the brokerage business fell 8 percent in the first quarter to $1.4 billion as the recession caused North American clients to pull back on insurance spending. Consulting segment revenue was also hit by the downturn, falling 16 percent to $1.1 billion.
Helping to cushion the bottom line was a reduction in expenses of more than 25 percent, to $2.23 billion from $3.13 billion a year earlier.
It also helped that Marsh’s brokerage business performed better internationally, growing 4 percent across Latin America, the Asia Pacific region, Europe and the Middle East.
Both Marsh and its larger rival, Aon Corp., have been aggressively cutting costs as fee and commission income has been constrained by lower insurance pricing and changes in what they are permitted to charge clients.
Marsh’s net profit in the first quarter was $176 million, or 33 cents a share, compared with a net loss of $210 million, or 40 cents per share, a year earlier, when the company took a large goodwill charge.
On an adjusted basis, the company earned 40 cents a share, 3 cents below analysts’ average forecast, according to Reuters Estimates.
Adjusted earnings would have matched Wall Street expectations were it not for accounting changes on how earnings per share are calculated and accelerated amortization of deferred compensation, the company said.
EYEING ACQUISITIONS, HERE AND ABROAD
Duperreault told Reuters in an interview that the company’s brokerage business, known for placing large commercial risks for corporations around the world, plans to hone in on small to medium-size U.S. markets, an area where rivals have dominated.
The company expects to grab market share through a series of acquisitions across the United States, and expects to reach deals this year, “no question about it,” he added.
Worldwide, Duperreault said Marsh also had its eyes open. “It is not easy in this environment to grow organically,” he said.
“Values are a little better, people are a little more interested, and we are going to take advantage of it,” he said.
Marsh shares were up $1.38 to $21.97 in afternoon trade on the New York Stock Exchange, but were still down nearly 40 percent from a 52-week high of $35 set Sept. 19, according to Reuters data.
(Reporting by Lilla Zuill; editing by John Wallace)
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