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MMC reports sluggish broking revenues

Marsh & McLennan Companies Inc (MMC) reported slow second quarter revenue growth in its broking division as new business wins were offset by the softening commercial (re)insurance market.

The company said revenues in insurance broker Marsh were up 2 percent to $1.1bn, while its reinsurance broking subsidiary Guy Carpenter also saw 2 percent growth to $217mn.

Profitability in the businesses, however, declined from the prior year, said MMC, "reflecting the absence of market services revenue" and higher-than-expected expenses "to support Marsh's long-term growth initiatives".

Overall revenues in its Risk and Insurance Services (RIS) operation rose 2 percent to $1.4bn, compared to a 9 percent rise in broking revenues at Aon Corp, and a 6 percent increase at Willis in the period, including strong organic growth of 6 percent and 4 percent respectively.

Growth in RIS for the six-month period was lower, at 1 percent, as revenues edged up to $2.9bn.

For MMC, better news came from its consulting division, with a 16 percent increase in revenues to $1.2bn in the quarter, driven by 12 percent growth at Mercer Human Resource Consulting and 27 percent at the Oliver Wyman Group.

Profitability in its consulting business grew 28 percent and its margin improved from 11.8 percent in the second quarter of 2006 to 13.1 percent.

The growth boosted the overall picture at MMC, which recorded total revenues up 7 percent to $2.8bn against the prior-year period.

Net income rose 3 percent to $177mn, or $0.31 a share, from $172mn, also $0.31 a share, in the second quarter of 2006.

But the net income figures were below analysts' expectations, with Thomson Financial compiling estimates of $0.36 a share.

The company, which completed the sale of its asset management arm Putnam Investments last week, confirmed its previously announced $1.5bn share repurchase programme, which it will begin executing "as soon as possible".

MMC's share price has recovered after slipping more than 8 percent last week to around $26. The company's stock had been trading higher on continued speculation over a possible leveraged buyout, but investor appetite has been hit by the uncertainty in the credit markets following the sub-prime debacle.

Early responses from analysts suggest full-year estimates may be lowered, while the stock is expected to be "weak" in Tuesday trading, although the share buyback "may provide some support."


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