Marsh & McLennan Companies, one of the world's largest insurance brokers, said on Thursday quarterly profit soared eleven-fold from a sale of its Putnam Investments unit, but operating earnings missed forecasts. Third-quarter profit rose to $1.95 billion, or $3.60 per share, from $176 million, or 31 cents, a year earlier.
Profit from continuing operations fell 40 percent to $80 million, or 15 cents per share, from $133 million, or 24 cents. Excluding items, Reuters Estimates said profit was 25 cents per share, 7 cents below the average analyst forecast. Quarterly profit had risen 92 percent at Aon Corp, Marsh's main insurance brokerage rival.
Chief Executive Michael Cherkasky attributed Marsh's earnings shortfall to "disappointing, and unsatisfactory" performance in the Marsh Inc insurance brokerage. Total revenue rose 10 percent to $2.79 billion, topping the average $2.68 billion forecast, but rose just 3 percent at Marsh Inc.
"Marsh is struggling," said Bill Bergman, an analyst at Morningstar Inc. "It is squarely in the middle of the toughest, most competitive sector of the market - big corporate accounts where retention is the lowest." Shares of Marsh fell 18 cents to $24.02 in morning trading on the New York Stock Exchange.
Cherkasky in September fired Brian Storms as chief of Marsh Inc and took over on an interim basis, after spending and advertising initiatives failed to boost sales in the United States and Britain.
SAVINGS: On a conference call, Cherkasky said ending some initiatives will help Marsh Inc save $125 million in 2008 without reducing revenue. Including pension and other savings, the total savings should top $200 million, he said.
Cherkasky called the initiatives "too many, too soon, for what was still a fragile organisation" after an $850 million settlement in 2005 with then-New York Attorney General Eliot Spitzer to settle bid-rigging charges.
Cherkasky, whose own leadership was criticised by an analyst on the call, added: "I got it wrong. I didn't help in the critical areas in Marsh in the US and the UK to get it right." Through Wednesday, Marsh shares had fallen 21 percent this year, while Aon shares had risen 31 percent. The Standard & Poor's insurance index .GSPINSC was down 9 percent.