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Underlying performance outweighs legacy issues for early full-year results

For the full year, consolidated revenues reached $11.6bn, an increase of 11 percent on 2002. Net income rose 13 percent to $1.5bn, while earnings per share hit $2.82 - a 15 percent increase on the previous year.

Group chairman Jeffrey Greenberg, son of legendary AIG chief Hank Greenberg, said the performance was down to a strong showing from the broking arm.

"MMC's strong results in 2003 were driven by the excellent performance of our largest business, risk and insurance services. Marsh's double-digit growth, adding $1bn in revenues, was broadly based across client segments, geographic regions, and risk specialties," he said.

Marsh contributed $1.8bn of total MMC revenues, up 13 percent on the same quarter in 2002. Operating income increased 10 percent to $400mn. Total 2003 revenue generated by the broker increased 16 percent on the previous year, reaching $6.9bn, and operating income increased 18 percent to $1.8bn.

MMC's consulting arm Mercer Oliver Wyman - the result of integrating Oliver Wyman with Mercer Management Consulting - also saw strong growth. Fourth quarter revenues rose 17 percent to $705mn and operating revenue came in at $85mn, bringing total revenue for the year to $2.7bn and operating revenue to $363mn.

However, Putnam, the group's investment management arm, continues to be dogged by controversy over revelations of market timing abuses, leading to a deluge of shareholder class action suits and investigation by the Securities and Exchange Commission (SEC).

Greenberg said the group had responded effectively to the crisis, acting decisively by bringing in new management, policies and procedures to improve compliance, and promising "restitution to the shareholders of the Putnam funds".

"We continue to invest in Putnam to strengthen its business. With MMC's support, Putnam's new leadership team, headed by chief executive Ed Haldeman, is working to restore the confidence of its investors, distribution partners, and employees," he added.

MMC warned that provision is yet to be made for Putnam's partial settlement with the SEC as civil penalties have not been dealt.

Analysts at Morgan Stanley maintained their equal-weight rating on shares of Marsh and McLennan, despite the fact that Q4 earnings were above their own estimate of 63 cents and an analysts' consensus of 65 cents. This, they said, was because of worries over the "underlying sustainability of margins" at Putnam, which has seen fund outflows of $54bn as a result of the market timing scandal. They said the lowered rating also took into account the potential costs of legal action relating to Putnam.

Employers Re returns to profit
Despite being the world's fourth largest reinsurer, it wasn't too long ago that General Electric's Employers Re was up for sale. But a year after the reinsurer took a pre-tax $2.5bn fourth quarter charge which boosted asbestos and WTC reserves but dragged the company to a $95mn overall year-end loss, the picture looks far rosier.

GE revealed last week that its insurance arm returned to black in 2003 with a handsome $2.1bn profit as the giant conglomerate announced its fourth quarter earnings. Employers Re was one of eight out of 13 of GE's operating units which revealed double-digit growth in the fourth quarter. Overall, this helped GE's full year earnings grow 3 percent to a record $15.6bn, or $15bn after "accounting changes". Revenues, however, grew only 1 percent to $134.2bn.

Following the industry-wide traumas of recent years, Employers Re has restructured to focus on its core P&C business. In the 2003 year it completed the sale of Financial Guaranty Insurance Company for $2.19bn to a group of investors led by the PMI Group. It has also announced an intention to pursue an initial public offering of a new company, Genworth Financial, that will comprise most of GE's life and mortgage insurance operations.

Endurance earnings race ahead
Bermudian (re)insurer Endurance announced on 22 January that its 2003 net income had rocketed 158 percent to $263.4mn, or $4.00 per diluted share.

After almost doubling net income in the third quarter, Endurance bettered the performance in the fourth, growing net income 107 percent to $86.5mn, equivalent to $1.28 per diluted share. Operating income for the full year reached $247.9mn, or $3.76 per diluted share, up 138 percent on 2002.

The strong performance was generated from gross premiums written and acquired of $262.2mn for the fourth quarter, compared to gross premiums written for the same period last year of $175.3mn. For the full year, Endurance booked gross premiums written and acquired of $1.6bn, double the 2002 figure.

Chairman and CEO Ken LeStrange said: "Endurance produced outstanding results for our shareholders in 2003. Every segment of our business performed well. As a result, we have been able to exceed our operating return on equity objective of 14-15 percent. Our strategy of focusing specialty underwriting capabilities across multiple market segments is showing success. We experienced significant growth and highly attractive margins across each of our businesses."

The continuing benign loss environment helped Endurance produce a combined ratio of 82.5 percent in the fourth quarter, compared to 87.1 percent in the same period last year.

Endurance was set up in Bermuda in December 2001 as part of a wave of new capital rushing to fill the void left by 9/11, loss reserve developments and the collapse in equities simultaneously sapping both sides of the balance sheet.

The company has since added US and UK subsidiaries, the former raked in $220mn in a successful February 2003 IPO, the latter FSA licensed and recently rehoused in Minster Court.

Endurance has also bought up substantial renewal rights on HartRe business, after the Hartford decided to sell off its reinsurance arm in May this year in a major restructuring.

And LeStrange predicted a fruitful year ahead for the group, commenting: "Based on the strong business platform we have built, we estimate that subject to normal catastrophe losses, Endurance will generate an operating return on equity in 2004 of between 15.5 percent and 17.5 percent. Given the strong profitability that we have generated, it is the intent of management to recommend to Endurance's Board of Directors an increase in our dividend payable in the first quarter of 2004 to $0.18 per ordinary share."

The (re)insurer also announced the sale of up to 8,050,000 ordinary shares in a secondary offering, after receiving notice from founding members Aon, Capital Z Financial Services Fund II and Thomas H Lee entities to exercise their rights under the terms of the Registration Rights Agreement.

Markel returns to underwriting profit
US insurer Markel Corporation continued its 2003 improvement by reporting fourth quarter net income of $4.53 per diluted share compared to $2.67 in the comparable period of the previous year.

Net income for the full year rose to $12.52 per diluted share from $7.65 per diluted share in 2002. The group produced a combined ratio of 96 percent for the quarter and 99 percent for the full year.

The solid underwriting performance combined with strong investment returns to boost book value per common share by 19 percent over the year.

Chairman and ceo Alan Kirshner commented: "We are pleased to report record earnings and strong growth in book value for 2003 despite losses recognised for legacy issues. More importantly, we have returned to underwriting profitability for the first time since we acquired Markel International and Gryphon. We are well positioned to continue producing strong underwriting and investment results in 2004."

Income from core operations rose in the final quarter on the back of higher underwriting profits in the Excess and Surplus Lines (E&S) and Specialty Admitted segments.

The group took a $50mn hit to its E&S unit in the previous quarter to shore up reserves for the loss struck 1997-2001 accident years, in addition to adding $55mn to asbestos and environmental reserves.

However, fourth quarter performance was tempered by higher losses from Markel's London Market operation, with $15mn in increased loss reserves attributable to 1997-2001 casualty reinsurance programs. A further $20mn was set aside in the fourth quarter for discontinued programs in the group's international operations.

Despite the reserve charges through the year, combined ratio for the London Market business has improved from 107 percent in 2002 to 104 percent, "due to more disciplined underwriting, increased pricing and expense control."

Max Re sees earnings boost
Bermudian reinsurer Max Re has reported Q4 net income of $36.4mn, or $0.76 per diluted share, compared to net income of $11mn, or net income of $0.29 per diluted share, for the same period in 2002.

Net operating income before minority interest, was $31.7mn, or $0.66 per diluted share, compared with $10.7mn, or $0.24 per share for Q4 2002.

Robert J. Cooney, chairman, president and CEO, said: "All aspects of our business performed well in 2003. We exceeded $1bn in gross premiums written, our property and casualty business produced an underwriting profit, and our alternative investments returned 16.57 percent. All of these factors led to net operating income before minority interest of $111.6mn."

Gross premiums written for the three months ended December 31, 2003 were $224.9mn, comprised of $116.6mn from property and casualty underwriting and $108.3mn from life and annuity underwriting, compared to $116.3mn, all from property and casualty underwriting, for the same period a year earlier.

The Hartford sets fourth quarter records
US giant The Hartford ended a tumultuous 2003 on a high as it delivered a strong fourth quarter performance to post net income per diluted share of $1.59, 57 percent higher than the $1.01 achieved in the last quarter of 2002.

Operating earnings per share came in at $1.52 for the quarter, higher than the analysts' consensus projection of $1.47.

Figures for the full year were naturally hit hard by the record $1.7bn after-tax asbestos charge taken in the first quarter, causing the group to book a net loss of $91mn, against a $1bn full year profit for 2002.

Nevertheless, with most observers of the view that the year's actions effectively put the asbestos issue to rest, management look to the coming year with optimism.

"The results we announced today [28 January] cap a quarter and end a year with a company that is stronger, bigger, and better prepared for the road ahead than it was 12 months ago," stated The Hartford's chairman and CEO Ramani Ayer.

"Early in the year, our expense actions initiated a major process to improve our cost competitiveness. At the same time, the comprehensive ground-up study of our asbestos reserves addressed deteriorating trends in the asbestos environment. None of it was easy, but all of it was needed to position us for future profitable growth," he added.

Among the fourth quarter highlights were a new high of $146.5bn worth of investment products assets under management, record total annuity sales of $4.4bn, record retail mutual fund sales of $1.6bn and record property casualty operating income of $211mn, a 49 percent improvement on the final quarter of 2002.

The Hartford's North American property casualty business produced a fourth quarter combined ratio of 95.6, completing the set of four consecutive quarters in 2003 under 100. The unit generated earned premiums up 13 percent to $2.2bn and net written premiums up 9 percent to $2.1bn.

Todd Bault from US equity house Bernstein noted the strong showing from the insurer's life business, but explained that much of the impact was already factored in.

Everest Re climbs higher
Bermuda based Everest Re saw its fourth quarter profits double from $55.6mn to $121.8mn as the reinsurer continued to capitalise on the strong rate environment.

This helped the group's full year after-tax income to increase by 95.6 percent on 2002 to $118.6mn, excluding realised capital gains and losses. Q4 net income came to $2.15 per share - bang on the First Call analysts' consensus.

Gross premiums written for the Q4 2003 were $1.26bn, a 38.5 percent increase compared to $912.2mn in 2002, while net premiums written were $1.19bn, an increase of 46.8percent from $811.3mn for the fourth quarter of 2002.

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