NEW YORK (AFX) - Marsh & McLennan Companies Inc., the nation's largest
insurance brokerage, said Wednesday its profit more than doubled in the third
quarter from a year earlier, helped by cost-cutting measures.
The New York-based company said net income totaled $176 million, or 31 cents
a share, in the July-September period, up from $69 million, or 12 cents a share,
a year earlier. Profit on continuing operations were 32 cents a share, up from
11 cents a year earlier.
The company said that "noteworthy items" reduced earnings by 6 cents a share
in the quarter. These included restructuring, legal and regulatory costs, many
of them related to the company's 2004 problems over fees that its fees that
government regulators deemed illegal.
Revenue was $2.88 billion in the third quarter, up 4 percent from $2.78
billion a year earlier.
Analysts surveyed by Thomson Financial had projected earnings of 35 cents a
share on revenue of $2.82 billion.
In early morning trading, Marsh & McLennan shares rose 33 cents to $29.77 on
the New York Stock Exchange.
The brokerage has been struggling with profitability since it was forced to
change its operating procedures after New York Attorney General Eliot Spitzer in
2004 accused it of bid rigging, price fixing and the use of hidden incentive
fees to steer property and casualty insurance contracts.
In January 2005, the company agreed to pay $850 million in restitution over
several years to settle the allegations. It also pledged to reform its
commission procedures -- known as market service agreements -- which has reduced
revenue growth.
The company's stock, which traded at more than $46 a share before Spitzer's
investigation became public, has been in the doldrums since. In the past year,
it has traded in a range of $24 to $33.42 and the company has been under
pressure to make changes.
Donald Light, a senior analyst with Celent LLC, a research and consulting
firm, said "the real news" was that operating income in the risk and insurance
division was $143 million in the third quarter, up from $20 million a year
earlier, reflecting recovery from the loss of contingent commissions.
In September, the company announced that it was cutting 750 jobs on top of
more than 5,000 eliminated in restructuring in the past two years.
Also last month, Michael G. Cherkasky, president and chief executive, said
Marsh & McLennan has received inquiries from parties interested in either
acquiring or partnering with its subsidiary Putnam Investments.
There also have been reports of a possible leveraged buyout of the entire
company.
Cherkasky said the company had a "good" quarter.
"Consolidated revenue growth was the highest we have achieved in two years,"
he said in a statement. "Our efforts to become more efficient across Marsh &
McLennan produced substantially improved year-over-year profitability and
margin, a continuation of the positive trends begun earlier this year."
Revenue was flat at $1.3 billion in risk and insurance services in the third
quarter from a year earlier; revenue at Kroll, the company's risk consulting and
technology division, were up 4 percent at $251 million.
Mercer consulting revenue rose 13 percent to $1.1 billion in the third
quarter from a year earlier, while revenues at Putnam declined 8 percent to $342
million.
Average assets under management at Putnam were $179 billion, down from $195
billion in the third quarter of 2005, the company said.
Still, "institutional inflows were positive for the first time since the
third quarter of 2003," the company said.
Putnam had finished 1999 with more than $390 billion in assets under
management before it was caught up in the 2004 market-timing scandal. Putnam
paid more than $190 million to settle the case with regulators.
For the first nine months of the year, profits totaled $764 million, or
$1.36 a share, up from $369 million, or 68 cents a share, in the first nine
months of 2005. Revenues were $8.9 billion compared with $8.8 billion in 2005.
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