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Tuesday, November 9, 2010

Something interesting from MMC's earnings report

Marsh and McClennan (MMC) has been a perpetually disappointing stock and the single worst of my DRIP plans since I bought it in 2005. That was one of those cases where I tried to venture into something I didn't understand after they had a bid rigging scandal that crushed the performance of their primary insurance brokerage unit and then had a scandal in their Putnam Funds unit as well. The result was that until recently every single earnings report they had was an incredible disappointment. Now they are just mildly disappointing.

In any case, when I was going through their press release, I couldn't help but notice that Mercer Consulting is seeing strong revenue growth in the area of health benefits (8% growth on an underlying basis). Earlier this year they were only experiencing about 2% growth. It could be that comparisons are easier now, though I don't quite think that's the case. More likely, this is an interesting side effect of the health care reform law. An entirely different storyline is visible in their "Rewards, Talent & Communications" line which often has to do with HR consulting for executive compensation packages. The growth there was quite strong at 12% on an underlying basis. It's possible that this signals more white collar employment and compensation growth in the near future, though it is good to avoid reading too much into any one number.

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