Bruised, battered and looking at its worst profits picture since 1997, Marsh & McLennan Cos. said yesterday it would lay off 3,000 people, or 5 percent of its payroll, as part of a strategy to deal with life after contingent commissions.
The world’s No. 1 insurance broker, looking at life as a smaller, less profitable company since it stopped accepting contingent commissions, said it would save $400 million a year after the belt-tightening.
M&M stands charged by Attorney General Eliot Spitzer with rigging the bids offered to its clients.
When it stopped accepting the contingent commissions, which accounted for $843 million in highly profitable revenue last year, most people figured new CEO Michael Cherkasky would have to reduce costs.
Cherkasky said yesterday that the broker was also talking to clients and to key brokers, both of which have grown apprehensive in light of the charges. He admitted that some clients were skittish.
But having to woo brokers and clients at the same time is a bit like trying to patch a hole in a ship taking on water, while selling tickets to the next cruise, during hurricane season.
The moves yesterday follow the firing Nov. 8 of Roger Egan, the president and COO of Marsh Inc., and Christopher Treanor, chairman and CEO of Marsh Inc.’s Global Placement.
Its general counsel, William Rosoff, also stepped down at the request of the company.
For Cherkasky, the next several weeks aren’t going to get any easier.
The December-January period in the property-casualty business is renewal time, and the true test of Cherkasky’s mettle will be told.
J.P. Morgan analyst David Sheusi said Cherkasky “is trying to right size the company for the underlying demand for the business.”
Profits in the quarter fell to $21 million from $357 million last year, on a 5 percent gain in revenue.