May 3, 2006 by Canadian Underwriter
Marsh & McLennan Companies, Inc. (MMC) reported its consolidated revenues in 2006 1Q were US$3 billion a 1% decline from 2005 1Q.
Overall net income in 2006 1Q was US$416 million, compared with US$134 million in 2005.
“A number of noteworthy items affected first quarter results in both 2006 and 2005,” Marsh noted in a release posted on its Web site. “First quarter 2006 noteworthy items include restructuring, legal and regulatory costs related to market service agreements, and other expenses totaling US$63 million. Stock option expense, which is now included in the operating results of each segment, was US$40 million.
“These noteworthy items and stock option expense reduced first quarter 2006 earnings per share from continuing operations by $.11. In the first quarter of 2005, similar noteworthy items reduced earnings per share from continuing operations by $.27.”
Michael G. Cherkasky, MMC president and CEO, said: “For the last 18 months, questions in the marketplace have been whether and when Marsh would recover. We began to see positive signs of recovery in Marsh in the fourth quarter of 2005.”
MMC’s risk and insurance services operating income increased markedly in 2006 1Q, as savings from the 2005 restructuring program were realized. Revenues declined 7% to US$1.5 billion, or 2% on an underlying basis in the first quarter.
Marsh’s risk and insurance revenues declined to US$1.1 billion, or 2% on an underlying basis, “largely due to resigning from unprofitable accounts,” MMC reported. Client retention improved substantially in 2006 1Q, as it did in the fourth quarter of 2005.
“In the United States, new business increased to its highest level since the beginning of last year,” MMC noted in a press release. “Marsh achieved these results in an insurance marketplace that had continued declines in commercial insurance pricing, particularly in Europe.”
Guy Carpenter’s first quarter revenues were US$281 million, an increase of 2% on an underlying basis. “Carpenter achieved double-digit growth in new business compared with last year,” MMC announced. “Higher risk retention by clients offset the effect of the meaningful increase in U.S. property catastrophe premium rates in the first quarter.”