NEW YORK
Marsh & McLennan announced Wednesday its recorded second quarter loss because of an impairment charge that it made in connection with the value of one of its divisions.
With the exception of this special charge, Marsh & McLennan managed to turn a profit that narrowly exceeded analysts' expectations linked according to the New York-based insurance broker and consulting firm with its improved profitability in its core risk and insurance services segment.
However, its consulting businesses continued to be hurt by ongoing weakness in the economy.
The overall second quarter loss to Marsh & McLennan was $193 million, which translates to 37 cents per share. During this same quarter the previous year, the company earned $65 million, or 12 cents per share.
It was the $315 million goodwill impairment charge taken against the value of its corporate security business that brought about the quarterly loss according to Kroll, the risk consulting company. This charge had the affect of reducing results by 60 cents per share.
Marsh & McLennan took the charge after reviewing their subsidiary Kroll's operations amid the sale in the second quarter of the government security clearance screening business, Kroll Government Services.
Marsh & McLennan earned 33 cents per share, when the impairment charge and other one-time items are excluded. This tops analysts’ expectations by 1 cent. Analysts Special charges are typically not included by analysts in their estimates.
In morning trading it is reported that shares of Marsh & McLennan rose 95 cents, or 4.4 percent, to $22.45.
Profits were helped by cutting costs, not unlike many other companies that have reported earnings in recent weeks. Profits were not necessarily the result of generated revenue.
Last year Marsh & McLennan’s revenue fell 13 percent to $2.63 billion from $3.03 billion according to the company. Each of Marsh & McLennan's three major operating divisions reported a decline in revenues including consulting and risk consulting, risk and insurance services, and technology.
On average, analysts polled by Thomson Reuters had forecast revenues of $2.76 billion.
Primarily as the result of a decline in interest income, risk and insurance services revenue fell 5 percent to $1.34 billion. But at the same time because of improvements at its two risk and insurance services subsidiaries, operating income rose sharply for both Marsh and Guy Carpenter, the two subsidiaries.
Because of cost-cutting measures, Marsh's profitability showed improvement. Both an increase in business and expense reductions brought improved earnings to Guy Carpenter's bottom line.
Marsh & McLennan's CEO Brian Duperreault, reports that overall the company is pleased with the revenue levels that they witnessed during the second quarter. This was said by Duperreault during a conference call about Marsh's insurance services segment. He added that this coupled with expense discipline, has led to a marked improvement in Marsh's profitability.