Marsh & McLennan swings to 3Q loss

CHARLOTTE, N.C. - Insurance brokerage Marsh & McLennan Cos. on Wednesday reported a third-quarter loss, reversing a year-ago profit when it got a boost from the sale of Putnam Investments. Its results came in below Wall Street expectations, and Marsh shares skidded more than 12 percent in afternoon trading.

The New York-based firm reported a net loss of $8 million, or 2 cents per share, in the period ended Sept. 30. That's a reversal from a profit of $1.95 billion, or $3.60 per share, a year ago.

The year-ago results included a $1.9 billion gain on the Putnam Investments sale in August 2007.

But Marsh's earnings from continuing operations slid 78 percent to $18 million, or 3 cents per share, from $80 million, or 15 cents per share. Excluding one-time items, adjusted profit was 21 cents per share in the latest quarter.

The latest results included an investment loss of $23 million, or 3 cents per share, primarily due to declines in private equity investments, the company said.

Total revenue edged up 4.5 percent to $2.84 billion from $2.72 billion a year ago.

Thomson Reuters said analysts it surveyed, on average, had been expecting a profit of 32 cents per share on revenue of $2.88 billion.

"Throughout the entire economic and business environment, there continues to be significant pressure," said Brian Duperreault, president and chief executive of Marsh & McLennan, on a conference call with analysts. "At Marsh & McLennan we have been moving swiftly to bring our risk and human capital expertise to bear for clients as well as to capitalize on opportunities the current environment affords a company like ours."

Marsh & McLennan, which competes with Aon Corp., helps companies find commercial insurance coverage.

In recent weeks, analysts have said insurance brokers like Marsh & McLennan should see insurance pricing stabilize as customers move away from battered insurer American International Group Inc. while underwriters face mounting catastrophic losses from Hurricanes Gustav and Ike and face weaker investment results. Those changes and losses will likely lead to a firming of pricing and more growth opportunities.

Revenue from the firm's core risk and insurance services segment inched up 1 percent to $1.3 billion. Additionally, reinsurance premium rates continue to decline across most coverage areas, the company said. Reinsurance is a type of insurance covering losses on other insurers' policies.

Revenue from the company's risk consulting and technology segment declined 2 percent to $254 million. That was offset by revenue from the company's consulting segment, which grew 9 percent to $1.3 billion in the third quarter.

Friedman, Billings, Ramsey & Co. analyst Bijan Moazami subsequently cut his 12-month target price on Marsh & McLennan stock to $25 from $30. He maintained his "Market Perform" rating.

"Despite management's best efforts to put a positive spin on Marsh & McLennan's earnings release, the results were quite discouraging," Moazami wrote in a note to clients.

While still concerned by certain issues, including how the company can cut costs, Moazami believes any improvement in profit margins will take time to materialize.

Marsh & McLennan shares fell $3.64, or 12.3 percent, to $26.06 in trading Wednesday.

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