Marsh & McLennan Profits Up for 2008; Down 9% in Q4

Marsh & McLennan Companies Inc. reported profits were up 4 percent for the full year 2008, but fourth quarter revenue was down some 9 percent over the previous year’s quarter.

In the fourth quarter 2008, consolidated revenue was $2.7 billion, a decline of 9 percent from the fourth quarter of 2007, or 3 percent on an underlying basis. Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates.

In the fourth quarter of 2008, MMC’s net income was $80 million compared with net income of $85 million in 2007.

For 2008, consolidated revenue was $11.6 billion, an increase of 4 percent from $11.2 billion in 2007, or 2 percent on an underlying basis. MMC’s results for 2008 include the previously reported non-cash goodwill impairment charge of $540 million in the Risk Consulting and Technology segment, which contributed to a net loss of $73 million. For 2007, net income was $2.5 billion reflecting MMC’s gain of $1.9 billion, net of tax, on the divestiture of Putnam Investments in August 2007, included in discontinued operations.

Risk and Insurance Services

Marsh’s revenue in the fourth quarter of $1.1 billion decreased 5 percent from last year, but increased 3 percent on an underlying basis. Underlying revenue increased 3 percent in the United States and Canada and 2 percent in international operations.

In the fourth quarter, reinsurance premium rates declined globally across most lines. Guy Carpenter’s fourth quarter revenue declined 6 percent to $146 million, or 2 percent on an underlying basis. Restructuring actions and continuing cost discipline led to a significant improvement in Guy Carpenter’s profitability in the fourth quarter, compared with the same period in 2007.

Risk and Insurance Services segment revenue in the fourth quarter of 2008 totaled $1.3 billion, a decline of 6 percent from the fourth quarter of 2007, but an increase of 1 percent on an underlying basis. Operating income in the fourth quarter was $104 million. Adjusted operating income, which excludes noteworthy items, more than doubled to $189 million from $92 million last year, due to improved operating performance at both Marsh and Guy Carpenter.

For 2008, segment revenue increased 1 percent to $5.5 billion, and was essentially unchanged on an underlying basis. Operating income increased 35 percent to $460 million, compared with $342 million in 2007. Adjusted operating income increased 58 percent to $729 million, compared with $462 million in 2007.

Fiduciary interest income, now segregated from Marsh’s and Guy Carpenter’s revenue for presentation purposes, was $25 million in the quarter, compared with $40 million last year. For the year, fiduciary income was $139 million, compared with $177 million last year.

Consulting

Mercer’s revenue declined 8 percent to $807 million in the fourth quarter, and was unchanged on an underlying basis. Mercer’s consulting operations produced revenue of $589 million, an increase of 1 percent on an underlying basis from the prior year’s fourth quarter; outsourcing, with revenue of $149 million, declined 6 percent; and investment consulting and management, with revenue of $69 million, grew 7 percent. For 2008, Mercer’s revenue grew 8 percent, or 7 percent on an underlying basis.

Primarily due to ongoing adverse global economic and financial market conditions, Oliver Wyman’s revenue declined 11 percent to $392 million in the fourth quarter, or 10 percent on an underlying basis. For 2008, Oliver Wyman’s revenue increased 2 percent, but declined 2 percent on an underlying basis.

Consulting segment revenue totaled $1.2 billion in the fourth quarter of 2008, a decline of 9 percent, or 3 percent on an underlying basis. Operating income declined to $82 million. Adjusted operating income was $121 million, compared with $162 million in 2007. For 2008, segment revenue totaled $5.2 billion, an increase of 6 percent, or 4 percent on an underlying basis. Operating income was $555 million in 2008, compared with $606 million in the prior year. Adjusted operating income was $595 million, compared with $614 million in 2007.

Risk Consulting and Technology

Kroll’s revenue of $188 million in the fourth quarter declined 11 percent from the year-ago quarter, or 8 percent on an underlying basis. Underlying revenue in the risk mitigation and response business increased 4 percent; litigation support and data recovery declined 6 percent; and background screening declined 19 percent.
Corporate Advisory and Restructuring was divested in the fourth quarter. As a result, revenue declined to $13 million and a loss was recorded in the quarter.

Risk Consulting and Technology segment revenue totaled $201 million in the fourth quarter of 2008, a decline of 19 percent, or 16 percent on an underlying basis. Due to the loss on the disposal of the Corporate Advisory and Restructuring businesses, the segment had a loss of $27 million, compared with operating income of $15 million in the prior year’s quarter. For 2008, segment revenue grew 1 percent to $993 million. Adjusted operating income declined 10 percent to $88 million.

Brian Duperreault, president and CEO of MMC, said: “I am pleased with the successful execution of the goals we set for MMC in 2008. Improved performance at Marsh was our highest priority. The substantial rise in Marsh’s profitability along with increased new business production and improved client revenue retention were significant achievements. The work at Marsh continues and its leadership is implementing operational improvements that should contribute to continued growth and profitability. Guy Carpenter is being run more effectively on a global basis. Its new leadership has successfully implemented cost containment and restructuring initiatives that have resulted in improved profitability in challenging reinsurance market conditions.

“Mercer and Oliver Wyman are being managed well in difficult times. Costs are being controlled closely while high levels of service are maintained. Both companies have strong global franchises, resources and capabilities that are highly valued and sought out by clients.

“For Kroll, 2008 was a year of transition. We redefined Kroll, put new leadership in place and assessed how its businesses fit into MMC’s long-term business strategy. The Corporate Advisory and Restructuring business was divested, and Kroll is continuing to streamline its operations to improve profitability.”

Source: MMC,
www.mmc.com