The Wall Street Journal-20080213-Marsh Profit Falls 62- On Insurance Weakness

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Marsh Profit Falls 62% On Insurance Weakness

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NEW YORK -- Marsh & McLennan Cos.' fourth-quarter profit fell 62% as weakness continued in its insurance-brokerage business.

Marsh, one of the world's largest insurance brokers, reported net income of $85 million, or 16 cents a share, as revenue increased 8.1% to $2.93 billion.

Earnings in Marsh's risk-and-insurance business fell 54%, which the company blamed on a revenue drop at its Risk Capital Holdings that cut per-share earnings by eight cents. The risk-and-insurance segment's operating margin, which has severely trailed Marsh's rivals, slumped to 4.2%.

Marsh also reported that profit in its consulting firms rose 38% on a 19% revenue increase.

The company hired a chief executive last month and fired the head of its insurance-brokerage unit in September over rising expenses, poor operating margins and weak revenue in the segment. Competitors such as Aon Corp. and Willis Group Holdings Ltd. are outflanking Marsh in the insurance business, and speculation on an asset sale or merger abounds as investors try to discern how new CEO Brian Duperreault will right the ship.

Pricing is an issue that has been of paramount concern to insurers of late. The current profit equation must factor how low to price policies so as to attract customers less concerned with risk in a time of fewer disasters.

Shares of Marsh & McLennan were up 69 cents, or 2.7%, to $25.99 in 4 p.m. trading on the New York Stock Exchange.