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Insurance Industry News from ProgramBusiness.comChanges at M&M
(As reported by Reuters)
Marsh & McLennan Cos Inc says it will replace its embattled chief executive, Michael Cherkasky, following a year of disappointing results and is evaluating strategies to boost shareholder value.
Marsh & McLennan acknowledged its problems and said a change in leadership would enable it to move forward.
"Marsh & McLennan's financial performance in 2007 has fallen far short of our expectations," Stephen Hardis, the non-executive chairman of the board, said in a statement.
Investors are betting that a sale of the insurance broker's consulting units -- or the whole company -- is under consideration. The New York-based insurance broker said its board would "evaluate strategies to enhance shareholder value," which is often considered code for a possible sale of assets. Marsh & McLennan's operations include human resources, management and risk consulting, as well as reinsurance.
"Cherkasky's strategy was to make the consulting and brokerage arms work together," said Bill Bergman, an analyst with Morningstar. "The board may now be willing to sell off some of the pieces."
Bergman said Daniel Glaser, a former American International Group executive who became head of Marsh's brokerage unit in November, would not have taken the job without knowing who his boss would be or if he was in line for Cherkasky's job himself.
Marsh mentioned Glaser prominently in its press release announcing Cherkasky's departure. It said Glaser was expected to "significantly improve Marsh's profitability."
Neither Cherkasky nor Glaser was available for comment, according to Marsh & McLennan spokeswoman Christine Walton. She declined to comment on whether the broker had hired an investment banker to advise the company.
Cherkasky had been under pressure since October 2004, when he took over in the middle of a bid-rigging scandal in which the company faced charges from then-New York Attorney General Eliot Spitzer.
Cherkasky, a friend of Spitzer's and former head of the company's risk consulting unit, brought Marsh & McLennan through the scandal, but at a high price, paying more than $800 million in fines and restitution and giving up a significant portion of revenue that came directly from insurers.
Hardis acknowledged that "Marsh ... might not be here today if it were not for Mike."
But Cherkasky had difficulty running Marsh & McLennan's diverse operations, particularly its Marsh unit, where brokers arrange insurance for businesses, and he changed strategies several times.
Cherkasky fired the Marsh unit's chief executive this year, after only a two-year tenure, for failing to raise revenue amid defections of major brokers and clients. He admitted in November that the brokerage unit's performance was "disappointing and unsatisfactory."
In the third quarter, Marsh & McLennan's operating profit from continuing operations fell 40 percent, while earnings at its leading rival, Aon Corp (AOC.N: ), nearly doubled.
Cherkasky will stay in his post while the search for a successor is underway.
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