Profits at Marsh & McLennan fell 70 per cent in the first quarter due to the elimination of certain bonus commissions and a slowdown in new business.
Michael Cherkasky, chief executive, yesterday declared Marsh had been "badly bruised" by the investigation into bid-rigging launched by New York attorney general Eliot Spitzer. As part of an $850 million (€660 million) settlement, Marsh agreed to stop accepting bonus commissions from favoured insurers, which accounted for about one-third of its revenue last year.
Mr Cherkasky said: "We're optimistic that the worst at Marsh is over. The talk at Marsh is no longer about prosecutions ... But I think it was a very tough quarter."
Marsh & McLennan has eliminated about 5,500 jobs since Mr Spitzer accused the company of rigging bids on insurance contracts last October. In addition to Marsh, the group owns Putnam, the mutual fund group, the reinsurer Guy Carpenter, Kroll, the investigative group, and the consulting group Mercer.
In the first quarter, revenues from its two insurance broking groups - Marsh and Guy Carpenter - dropped 11 per cent to $1.7 billion.
Results from Putnam, the troubled mutual fund group which also faced charges from Mr Spitzer, were also poor, with revenues dropping 12 per cent in the quarter to $398 million. The group has suffered from billions of dollars in outflows since 2003 when its management fell foul of regulators over its apparent co-operation with market timing by short-term investors in its funds.
The group's net income dropped to $134 million, or 25 cents per share, from $446 million, or 83 cents, in the previous year. The group recorded $225 million in pretax charges for severance and bonuses to retain key employees. - (Financial Times Service)
