Marsh Reports Robust Revenue Growth

February 15, 2011

Marsh & McLennan Companies Inc. today reported strong revenue growth and net income for the fourth quarter and full year 2010 year.

Consolidated revenue for the company in the fourth quarter of 2010 was $2.8 billion, an increase of 9 percent from the fourth quarter of 2009, or 6 percent on an underlying basis, which is before the impact of acquisitions and dispositions. For 2010, consolidated revenue was $10.6 billion, an increase of 7 percent from $9.8 billion in 2009, or 3 percent on an underlying basis.

In the fourth quarter of 2010, net income rose to $203 million compared to net income of $23 million in 2009. Adjusted operating income in the fourth quarter rose 22 percent to $379 million compared with prior year. For the full year, net income increased to $855 million from $227 million in 2009. Adjusted operating income grew 14 percent to $1.5 billion for 2010.

Risk and Insurance

In overall risk and insurance services, revenue increased 11 percent to $1.5 billion in the fourth quarter of 2010, or 5 percent on an underlying basis. Operating income was $225 million, compared to $127 million in the fourth quarter of 2009. Adjusted operating income in the fourth quarter of 2010 increased 22 percent to $259 million from $213 million in 2009.

For the year, overall risk and insurance revenue rose 9 percent to $5.8 billion, or 2 percent on an underlying basis. Operating income grew 22 percent to $972 million, compared with $796 million in 2009; adjusted operating income increased 10 percent to $1.1 billion in 2010.

Insurance broker Marsh’s revenue in the fourth quarter of 2010 was $1.3 billion, an increase of 12 percent, or 6 percent on an underlying basis. International operations underlying revenue increased 8 percent in the fourth quarter of 2010, reflecting 10 percent growth in both Latin America and Asia Pacific and 8 percent growth in EMEA. In the United States/Canada region, underlying revenue grew 3 percent. For the year, Marsh reported revenue of $4.7 billion, an increase of 10 percent, or 2 percent on an underlying basis.

Reinsurance expert Guy Carpenter’s fourth quarter 2010 revenue increased 2 percent to $184 million, or 3 percent on an underlying basis. For the year, revenue increased to $975 million from $911 million, an increase of 7 percent, or 2 percent on an underlying basis.

“Marsh’s strong fourth quarter results capped a year of excellent performance. Robust new business development contributed to underlying revenue growth across all geographies. Guy Carpenter also had a very successful year. Both underlying revenue and profitability increased, supported by continued new business development,” said Brian Duperreault, president and CEO of Marsh & McLennan Inc.

Marsh continued to build its retail agency platform, Marsh & McLennan Agency, in the fourth quarter, acquiring Trion with $74 million in annual revenue and Strategic Benefit Solutions. In January, Marsh & McLennan Agency acquired RJF Agencies, one of the largest independent insurance agencies in the upper Midwest.

In a morning conference call on the results, company officials said the retail operation is nearing $300 million in revenues and they see it being able to grow to between $700 million and $1 billion through organic growth and additional acquisitions.

CEO Duperreault cautioned those who believe a major catastrophe might harden pricing in property/casualty markets, suggesting pricing will instead turn on the “psyche” of the markets. “I haven’t seen exhaustion in the markets yet, so I’m not so sure a catastrophe would do something,” he said.

A Marsh report in January found that soft commercial insurance market conditions that persisted throughout the U.S. in 2010 will continue into 2011. The report concluded that key commercial insurance market drivers from 2009—including intense competition among insurers, abundant capacity, and relatively few insured catastrophe losses—continued through 2010 and are forming market conditions for 2011.

Duperreault said the challenge for brokers is to be able to perform in all markets. “If you can’t perform in soft markets, you can’t perform,” he said.

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