Pricing scandal hits Marsh profit

Marsh hopes its prospects are looking up

First quarter profits fell 70% at giant US insurance broker Marsh & McLennan as it battled to recover from a price-rigging scandal.

It posted net profits of $134m (£71m) for the January to March quarter, compared to $446m a year ago.

However, Marsh has climbed out of the red with its weak profits representing a recovery on losses of $676m in the fourth quarter of 2004.

Marsh agreed settlement with the New York Attorney General over the scandal.

Marsh's crisis began last October when campaigning New York Attorney General Eliot Spitzer, whose crusades against corporate sleaze have won him the nickname 'Sheriff of Wall Street', began an inquiry into market manipulation in the insurance sector.

Multiple problems

Marsh was sued for allegedly steering customers towards favoured insurers in return for illegal payments.

Marsh agreed in January to pay a settlement of $850m, which was taken against its fourth quarter 2004 accounts, along with a one-off charge of $618m. Two former executives pleaded guilty to criminal charges.

Since last October, global giant Marsh has cut 5,500 jobs and launched a major restructuring, seeking annual savings of $375m. It currently has more than 60,000 staff.

Its latest financial results included a $225m charge for restructuring and regulatory compliance costs.

Marsh said the charges nearly halved earnings per share to 25 cents compared to the 52 cents it would otherwise have clocked up.

Insurance analysts believe Marsh's crisis is bottoming out.

"It is in the awkward transition of trying to put regulatory and legal issues behind it", said Wayne Bopp, an analyst at Fifth Avenue Investment Advisors.

Marsh said it was implementing its plan to simplify its management structure, improve efficiency, account profitability and transparency. It expects to see "profitable growth" next year.