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Fourth-Quarter Profits for Marsh Up

Source: MarketWatch

Posted on 15 Feb 2011

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As Marsh & McLennan Cos. avoided big class-action settlements that dented results in the year-earlier period, the insurance brokerage and consulting firm reported a jump in quarterly profit Tuesday.

Fourth-quarter profit rose to $203 million, or 37 cents a share, from $23 million, or 4 cents a share, in the year-earlier period.

In late 2009, Marsh & McLennan paid more than $400 million to settle securities and ERISA class-action lawsuits that were filed in 2004.

Adjusted earnings in the latest period came in at 41 cents a share, the company reported. That compares with 38 cents a share in the year-earlier quarter.

Marsh & McLennan was expected to make 39 cents a share, according to the average estimate of analysts surveyed by FactSet Research.

Total revenue rose to $2.8 billion from $2.6 billion in the year-ago quarter. The company’s consulting business generated revenue of $1.3 billion, up 6%, while revenue rose 11% to $1.5 billion at the risk and insurance-services segment.

Organic revenue at the company’s main insurance-brokerage division edged higher, as competition and weak prices in the property-and-casualty insurance market weighed on growth.

Insurance brokers struggled to generate revenue growth in recent quarters because slow economic growth restrained demand for insurance coverage from businesses.

Meanwhile, insurers have lots of spare money and are competing more to take on new risks. This can depress insurance premiums, producing a so-called soft market. Brokers often charge commissions based on premiums, so when premiums decline, their revenue can fall, too.

The U.S. economic recovery has gained steam in recent months, but competition between insurers remains robust.