Marsh & McLennan Companies reported first-quarter net income dropped 36 percent compared with the period last year.
The New York-based insurance services firm reported first-quarter net income of $268 million, or $.49 per share, compared with $416 million, or $.76 per share, for the same period in 2006.
Morgan Stanley senior property-casualty analyst William Wilt said the results appear “weak against expectations, and we would expect the stock to be appreciably off today.”
Mr. Wilt noted the underlying revenue growth in the Americas was down 3 percent, which he said was well below its peers.
Risk consulting revenues remained flat against Morgan's estimate of a 10 percent rise.
Bear Stearns analyst David Small attributed the 3 cents per share earnings miss to lower than expected results in the Marsh Inc. brokerage division and Kroll Security subsidiary.
Mr. Small said that decline in Marsh Inc. profits comes when revenues at rivals Aon and Willis are rising, and it means “Marsh is losing customers to its rivals.”
In a conference call this morning, MMC Chairman Michael Cherkasky rejected that notion, asserting “when you do an apples to apples comparison, you just don't see this happening.”
“We continue to see new business and our retention segment is isolated to a small segment,” he said.
He then asserted the company is “stronger now than it was a year ago and substantially stronger than it was two years ago.”
In addition, the $500 million share repurchase is lower than expected. Bear Stearns wonders how the company “plans to fully offset the dilution” from the sale of its Putnam investment unit, Mr. Small wrote.
In other financial highlights:
o Guy Carpenter's reinsurance brokerage revenues increased 4 percent in the first quarter to $292 million driven by an 11 percent growth in new business.
o Consulting revenues increased 13 percent to $1.1 billion, with 7 percent growth on an underlying basis.
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