Marsh Q2 Insurance Revenue Up 3%; Sees ‘Modest’ Price Increases

August 8, 2013

Marsh & McLennan Cos. (MMC) reported its 2013 second-quarter net profit of $388 million, up 17.9 percent compared to $329 million net profit reported during the same quarter one year ago.

Net profit for the first six months of 2013 rose to $801 million, an 18.5 percent jump from $676 million net profit one year ago.

MMC’s insurance brokerage unit Marsh reported revenue in the second quarter was $1.397 billion, an increase of 3 percent from last year.

MMC consolidated revenues in the second quarter were $3.088 billion, a 2 percent increase from $3.026 billion during the prior-year quarter. Consolidated revenues for the first six months of 2013 were $6.214 billion, up 2.3 percent from $6.077 billion a year ago.

MMC investment income for the second quarter was $23 million, up from $4 million a year ago. The increase reflects the first-time recognition of carried interest in a private equity fund Marsh & McLennan created in 2003. For the first six months of 2013, investment income was $44 million, up from $24 million last year.

The firm generated adjusted operating income growth of 13 percent, which came on top of 14 percent growth during the second quarter of last year, according to CEO Daniel Glaser.

“Our performance in the quarter represents another step forward in our journey to be an elite company,” Glaser said.

Insurance broker Marsh Inc. CEO Peter Zaffino said that the U.S.region was the only major region where the company saw pricing increases, albeit modest ones. Comparing casualty lines, year-over-year, “more of our clients saw rate increases than the prior year, but the average was a little less,” Zaffino said during the earnings conference call.

Zaffino also said one segment that didn’t see as much in terms of price increases was property.

There are “a couple of peaks that are being mentioned” in public directors and officers (D&O), workers’ compensation, and some excess umbrella, Zaffino said. “But generally speaking, it is modest increases for us in terms of pricing.”

“So I feel that it is a very stable environment,” Zaffino said.

The following are more results from Marsh & McLennan’s business units.

Risk and Insurance Services

Risk and Insurance Services revenue rose to $1.688 billion in the second quarter, a 3 percent increase from a year ago. For the first six months of 2013, segment revenue was $3.5 billion, a 4 percent rise from the prior-year period.

Operating income was $421 million, up 8 percent compared with $390 million in the prior year. Operating income for the first six months of 2013 was $889 million, an 11 percent increase from $802 million in 2012.

Insurance brokerage unit Marsh’s revenue in the second quarter was $1.397 billion, an increase of 3 percent from last year. In the U.S./Canada division, underlying revenue grew 2 percent. International operations had underlying revenue growth of 3 percent in the quarter, reflecting growth of 10 percent in Latin America; 5 percent in Asia Pacific; and 1 percent in EMEA (Europe, the Middle East and Africa). Reinsurance brokerage unit Guy Carpenter’s second quarter revenue was $285 million, an increase of 4 percent from last year.

Consulting

Consulting segment revenue was $1.410 billion in the second quarter, up 1 percent from the prior-year quarter. For the first six months of 2013, segment revenue was $2.8 billion, also up 1 percent compared to one year ago.

Operating income for the quarter was $205 million, a 12 percent jump from $183 million in the prior year. For the first six months of year, operating income increased 13 percent to $392 million, compared with $347 million in 2012.

Human resource consulting unit Mercer’s revenue was $1.044 billion in the second quarter, a 3 percent increase. Management consulting unit Oliver Wyman’s revenue was $366 million in the second quarter, a 4 percent decline from a year ago.

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