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Marsh & McLennan revenue up in first quarter

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Marsh & McLennan revenue up in first quarter

Marsh & McLennan Cos. Inc. reported $4 billion in revenue for the first quarter of 2018, a 14% increase over the same period last year, but the increase was 4% on an underlying basis after accounting changes were factored in.

Challenging market conditions in the United Kingdom and Middle East reduced revenue in its Europe, Middle East and Africa region for its brokerage business, but the United States and Canada saw steady underlying growth, the brokerage reported Thursday.

In the first quarter of 2018, Marsh & McLennan adopted new accounting rules from the Financial Accounting Standards Board that affect when certain revenues are recognized in financial results. For all its businesses, it gave comparable increases on an underlying basis excluding the accounting change and the effect of mergers and acquisitions, in addition to percentage increases that reflect the change.

In its risk and insurance services revenue segment, which includes its core insurance and reinsurance brokerage operations Marsh L.L.C. and Guy Carpenter & Co. L.L.C., revenue increased 17.8% to $2.34 billion, or 3% on an underlying basis. Marsh’s revenue increased to $1.69 billion, up 2% on an underlying basis, and Guy Carpenter’s revenue increased 7% on an underlying basis to $637 million.

Consulting revenue increased 5% on an underlying basis to $1.67 billion.

Net income for Marsh & McLennan increased 21.3% to $690 million.

In insurance lines, property insurance rates increased the most and professional lines rates increased 2%, but casualty rates fell 2%, said Dan Glaser, president and CEO of Marsh & McLennan, on a conference call with analysts. Reinsurance rates increased 6% on average at Jan. 1 renewals, but rates were flat for April 1 renewals, which primarily focus on Japanese reinsurance business, he said.

For the year, Marsh & McLennan expects underlying revenue growth of 3% to 5%, Mr. Glaser said.

Marsh’s U.S. and Canada revenue increased 3% on an underlying basis to $803 million, but international revenue was flat at $891 million. In Europe, the Middle East and Africa, underlying revenue decreased 2%.

The U.K. “had a challenging start to the year,” said John Q. Doyle, president and CEO of Marsh. The Middle East and Africa were also weak, he said, noting that Marsh had recently changed the leadership for both regions.

Continental Europe had a “solid” start to the year, and Asia-Pacific and Latin America “continued to perform well in the quarter,” he said.

Marsh will be making more personnel changes to streamline management, said Mr. Doyle, who took over as CEO of Marsh last July after the unit’s previous CEO, Peter Zaffino, left to join American International Group Inc.

“We have recently begun an effort to simplify our organizational structure,” Mr. Doyle said. “The result of that will be fewer layers of management, and our leaders on average will increase their span of control.”

Looking forward, Mr. Glaser said one area where the brokerage expects to see future growth is cyber insurance in Europe, following the introduction next month of stricter data privacy rules, which include mandatory breach notification requirements.

Currently, about 90% of global cyber premium is derived from the United States, he said.

 

 

 

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