Originally created 03/02/05

Top brokerage takes wide loss



NEW YORK - Marsh & McLennan Companies Inc., the nation's largest insurance brokerage, on Tuesday reported a wider-than-expected loss of $676 million for the fourth quarter as it absorbed a host of restructuring charges, regulatory fines and related expenses.

The New York-based company also announced several steps aimed at cutting costs and raising income after its $850 million settlement of New York Attorney General Eliot Spitzer's bid-rigging and price-fixing probe.

The steps include:

 •  Halving its dividend to 17 cents for the first quarter.

 •  Cutting 2,500 workers from Marsh Inc., the risk and insurance services unit that was at the center of Mr. Spitzer's investigation.

 •  Spinning off its MMC Capital private equity unit.

 •  Stopping its dealings with thousands of small companies that the brokerage considers unprofitable.

 •  Introducing new, higher commission rate schedules designed, in part, to make up for the incentive fees that Mr. Spitzer had targeted as "kickbacks."

Michael G. Cherkasky, the president and chief executive officer, told The Associated Press that the moves were aimed at improving the company's performance.

"We're going to be a better and more-profitable and more-efficient company," he said. "We're confident this is going to put us in a position that, by the end of '05 and beginning of '06, we'll see appropriate returns for our shareholders."

The brokerage said its net loss, which translated to a loss of $1.28 a share, compared with a profit of $375 million, or 69 cents a share, for the October-December period a year earlier.

Analysts surveyed by Thomson First Call had expected a fourth-quarter loss of 60 cents a share.

Revenues for the quarter totaled $2.99 billion, down 1 percent from $3.02 billion a year earlier.

As part of its earnings announcement, Marsh & McLennan said it was cutting its dividend from 34 cents to 17 cents, payable March 30 to shareholders of record as of March 15.

Marsh's plan to lay off more workers follows some 3,000 job cuts that were made across all divisions last fall. The company employed about 60,000 people worldwide at year's end.

The decision to spin off Marsh & McLennan's private equity unit, MMC Capital, aims to eliminate "any appearance of a conflict of interest," Mr. Cherkasky told AP.

MMC Capital manages three private-equity funds that make investments in insurance-related businesses, with assets of about $2 billion.

Marsh & McLennan's money represents some 25 percent of the total, and senior Marsh executives invested individually in the past.