Marsh & McLennan Beats By A Penny

Marsh & McLennan Companies Inc.’s (MMC: 22.14 0.00 0.00%) fourth quarter adjusted earnings of 38 cents per share were a penny ahead of the Zacks Consensus Estimate and also up from 36 cents reported in the year-ago quarter.
 
Results were aided by strong margin improvement in the Risk and Insurance Services as a result of improved profitability at Guy Carpenter and were offset by increase in expenses, lower interest and investment income and the strengthening of the US dollar.
 
However, as a result of the settlement of the securities and ERISA class action lawsuits filed in 2004, Marsh & McLennan’s net income was $38 million or 7 cents per share for the reported quarter, compared to the net income of $80 million or 15 cents in the year-ago period.
 
Consolidated revenue was $2.7 billion, up 3% year-over-year but down 2% on an underlying basis.
 
The Risk and Insurance Services segment revenue was $1.3 billion, up 5% year-over-year but down 2% on an underlying basis. However, operating income was significantly up 22% year-over-year, reflecting improved benefits of cost-containment measures. Marsh’s revenue was $1.2 billion, up 4% year-over-year. Underlying revenue declined 1% overall and also in the international operations but grew 9% in Latin America and 5% in Asia-Pacific. 

Guy Carpenter’s revenue during the reported quarter was $180 million, up 23% year-over-year.
 
The Consulting segment’s revenue increased 3% year-over-year to $1.2 billion or 2% decline on an underlying basis. Operating income increased significantly by 60% year-over-year to $131 million.
 
Mercer’s revenue increased 7% year-over-year to $832 million, but was flat on an underlying basis. Mercer’s consulting operations had underlying revenue of $609 million, outsourcing revenue increased 3% year-over- year to $167 million, whereas investment consulting and management revenue increased 9% year-over- year to $85 million.

Oliver Wyman’s revenue decreased 3% year-over-year to $378 million and 7% on an underlying basis.
 
Revenue in the Risk Consulting and Technology business that includes Kroll’s operations was $170 million, down 6% from the prior year period or flat on an underlying basis. Kroll’s revenue of $169 million increased 1% from the year-ago quarter and was flat on an underlying basis.
 
During the reported quarter, Marsh & McLennan had investment income of $23 million, up from $19 million in the year-ago quarter, largely due to marked-to-market gains in private equity investments. However, total expenses increased 6.6% year-over-year to $2.72 billion.
 
For full year 2009, Marsh & McLennan’s consolidated revenue was $10.5 billion, down 9% from $11.5 billion in 2008 and declined 5% on an underlying basis. Net income was $242 million as compared to a net loss of $73 million in 2008. Adjusted earnings per share increased 13% to $1.58 from $1.40 in 2008.
 
Business Update
 
During the reported quarter, Marsh & McLennan announced an agreement to acquire HSBC Insurance Brokers Ltd, an international provider of risk intermediary and risk advisory services headquartered in London. The transaction is expected to close early in the second quarter of 2010. In addition, Marsh & McLennan also announced the acquisition of three U.S. insurance agencies: The NIA Group, Insurance Alliance, and Haake Companies during the quarter.