Magazine article American Banker

Marsh: Weak Quarter Not a Case for Split-Up

Magazine article American Banker

Marsh: Weak Quarter Not a Case for Split-Up

Article excerpt

Disappointing second-quarter results will not force Marsh & McLennan Cos. to break itself up, the scandal-plagued company's president and chief executive officer said.

"I think it's still too early in the recovery process for us to discount what I think are the substantial advantages of being one company," Michael G. Cherkasky, who took the reins at the New York company in October 2004, said Thursday in a conference call with analysts.

But Mr. Cherkasky called the period "the first quarter of the six I'm disappointed we didn't do better."

Marsh said its net income rose 3.6% from a year earlier, to $172 million, in part because of cost-cutting measures. But earnings per share of 31 cents fell 8 cents short of the average projection of analysts surveyed by Thomson First Call.

By midafternoon Thursday the stock had dropped 7.4% from Wednesday's close, to $24.90 a share.

Revenue from Marsh's risk and insurance services unit fell 4.9%, to $1.35 billion, because of falling insurance prices and lost business in Europe. Revenue from Putnam Investments, the company's Boston mutual fund unit, dropped 10% as average assets under management fell 2.8% from the first quarter and 6.3% from a year earlier, to $185 billion.

Jon Balkind, an analyst at Fox-Pitt, Kelton Inc., called the earnings a "fairly sizable disappointment."

David Anthony, an analyst at Argus Research Co., said talk in the investor community of selling parts of Marsh had centered on Putnam.

"Everybody's been trying to get rid of Putnam," he said.

However, owners of insurance company stocks have traditionally been patient investors, Mr. Anthony said, and there is little precedent for "unfriendly actions" in which the investors would force dramatic moves.

Marsh's stock price has fallen by nearly half since 2004, when New York Attorney General Eliot Spitzer charged the company with rigging bids, fixing prices, and using hidden incentive fees to steer property/casualty insurance contracts. …

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