MMC reports 2007 Q3 profits up, but insurance broking results “unacceptable”

Marsh & McLennan Companies, Inc. (MMC) reported a 2007 Q3 profit of US$1.9 billion, compared to US$176 million during the same period last year.
Marsh reported being happy with revenues generated by its consulting businesses. MMC’s consulting segment revenue grew 14% to US$1.2 billion in the third quarter on a reported basis, and 9% on an underlying basis, the company reported.
But citing extremely soft market conditions, March said it was disappointed with its insurance broking results.
Despite continued strong performance in our consulting businesses, MMC’s third-quarter results were significantly impacted by unacceptable financial performance in our insurance broking business, MMC president and CEO Michael G. Cherkasky said in a statement. We have changed the leadership at Marsh and are taking comprehensive actions to improve profitability.
New business in insurance and reinsurance broking compensated for extremely soft market conditions. Mercer and Oliver Wyman continued to perform at exceptional levels, producing strong revenue and earnings growth, while Kroll’s underlying revenue growth was 11%.
Guy Carpenters 2007 Q3 revenue was US$226 million, representing 5% growth over 2006 Q3. This growth, which was primarily due to continued strong new business, was achieved despite a significant decline in U.S. property catastrophe premium rates as well as higher risk retention by clients, Marsh noted.
Marsh also announced it would accept enhanced commissions on mid-sized and small commercial accounts in the United States, a position that received a qualified endorsement from the Risk and Insurance Management Society (RIMS).
Transparency and client disclosure are the cornerstones of RIMS position on broker compensation, RIMS noted in a statement on its Web site, adding it looked forward to reviewing the details of Marshs proposed program. Marshs announcement that it will accept enhanced commissions on midsize and small commercial accounts in the United States describes a program that is in accord with RIMS position.