Layoff Plans With MMC Earnings Report?

By Mark E. Ruquet

NU Online News Service, Feb. 28, 1:18 p.m.EST?Reports of massive layoffs in the works and questionsover its financial future foreshadow Marsh & McLennan's releasetomorrow of its fourth-quarter earning's results.[@@]

MarketWatch from Dow Jones said as many as 1,000 employeescompanywide could get the axe as New York-based MMC looks to trimcosts, and a British publication said hundreds could lose theirjobs there.

The company is faced with the loss of more than $800 million inrevenue from contingency fees it gave up to settle an investigationwith New York Attorney General Eliot Spitzer. He sued MMC inOctober last year over allegations that the company's brokeragedivision, Marsh, engaged in price-fixing and other abuses to steerinsurance contracts to insurers paying profitable, volume-basedcontingency fee commissions.

The company agreed to pay a settlement of $850 million over fouryears to clients who were hurt by the alleged scheme.

Last week, the company began a public relations offensive withan open letter titled "The New Marsh: Making changes to restoreyour trust."

Barbara Perlmutter, senior vice president of public affairs forMMC, said the letter appeared in a number of major newspapersthroughout the country. It was the first in a series of advertisingcampaigns the company plans to do to reclaim its image.

As far as additional layoffs, she could not comment butindicated that the Tuesday earnings release would answer thequestion.

Jay H. Gelb of Prudential Equity Group, LLC, in a report saidthe company plans to release its new business plan along with itsfourth-quarter report. He noted some things to watch out for willbe pressure on MMC's revenue growth despite $400 million in cutsthat included a 3,000-employee layoff and the sale or spin-off ofPutnam, its financial investment arm. Prudential said it expects tosee deterioration in Marsh's organic growth, negatively affected bythe soft market.

A sale of Putnam, Mr. Gelb said, might be difficult and costlyfrom a tax stand-point, but a spin-off could be arranged withpossible tax benefits for MMC.

Ms. Perlmutter was asked if the settlement agreement worked outwith Mr. Spitzer could have positive tax implications for MMC. Shesaid the matter is being looked into and there may be some answersto that question in the fourth-quarter report.