Marsh Insurance Profit Up; Settlements Hit MMC Results

February 10, 2010

Insurance broker Marsh countered a drop in revenues in the U.S. and Canada with higher revenues from Latin America and Asia Pacific markets. Marsh and its risk management partner, Guy Carpenter, managed a 13 percent profit increase in the fourth quarter.

Parent company Marsh & McLennan Cos. Inc. was profitable but saw its fourth quarter profit reduced 53 percent as a result of payments to settle shareholder lawsuits.

MMC Consolidated

MMC’s consolidated revenue in the fourth quarter of 2009 was $2.7 billion, an increase of 3 percent from the fourth quarter of 2008, or a decline of 2 percent on an underlying basis. Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates. For 2009, MMC’s consolidated revenue was $10.5 billion, a decline of 9 percent from $11.5 billion in 2008, or 5 percent on an underlying basis.

Due to the settlement in the fourth quarter of 2009 of the securities and ERISA class action lawsuits filed in 2004, MMC’s net income declined to $38 million, compared to net income of $80 million in 2008.

For the year, MMC net income was $242 million, compared with a net loss of $73 million in 2008.

As part of court-approved settlements, without admitting wrongdoing, MMC paid a total of $435 million to settle both the securities and related ERISA class action lawsuits and received $230 million from its insurance carriers. The net settlement of $205 million is tax deductible.

Marsh and Guy Carpenter

The risk and insurance services segment – Marsh and Guy Carpenter—reported that revenue in the fourth quarter of 2009 was $1.3 billion, an increase of 5 percent from the fourth quarter of 2008, or a decline of 2 percent on an underlying basis. Operating income in the fourth quarter rose 22 percent to $127 million, compared with $104 million in the fourth quarter of 2008. Adjusted operating income in the quarter increased 13 percent to $213 million, compared with $189 million last year.

For the year, revenue for Marsh and Guy Carpenter declined 3 percent to $5.3 billion, or 1 percent on an underlying basis. Operating income increased to $796 million, compared with $460 million in 2008. Adjusted operating income increased 35 percent to $985 million, compared with $729 million in 2008.

Marsh’s revenue in the fourth quarter of 2009 was $1.2 billion, an increase of 4 percent from the same period last year, or a decline of 1 percent on an underlying basis.

For the year, Marsh reported revenue of $4.3 billion, a decline of 5 percent, or 1 percent on an underlying basis. Underlying revenue growth of 2 percent in international operations was led by Latin America with 9 percent growth and Asia Pacific with 5 percent growth. Underlying revenue was flat in EMEA and declined 4 percent in the U.S./ Canada region.

In the fourth quarter of 2009, Marsh announced an agreement to acquire HSBC Insurance Brokers Ltd, an international risk intermediary headquartered in London. The transaction is expected to close early in the second quarter. In addition, Marsh also announced the acquisition of three U.S. insurance agencies: The NIA Group, Insurance Alliance, and Haake Companies.

Guy Carpenter’s fourth quarter 2009 revenue increased 23 percent to $180 million, including the acquisitions of Collins and Rattner Mackenzie in 2009. Revenue increased 4 percent on an underlying basis. For the year, Guy Carpenter’s revenue increased to $911 million from $803 million, an increase of 13 percent, or 8 percent on an underlying basis.

MMC’s consulting divisions Oliver Wyman Group, Mercer and Kroll had flat or lower revenues for the year but showed improvement in the fourth quarter.

“I am particularly pleased with our fourth quarter results since each of our operating segments achieved double-digit growth in adjusted operating income,” said Brian Duperreault, MMC president and CEO said.

“Marsh had an outstanding year, implementing operational improvements to enhance profitability. Guy Carpenter also had an excellent year, as solid new business development and expense discipline resulted in strong growth in revenue and profitability.”


Was this article valuable?

Here are more articles you may enjoy.