A Canadian private-equity firm is calling for the breakup of Marsh & McLennan Companies, saying that separating the consulting and risk management units from the insurance brokerage would maximize shareholder value and protect the individual companies' worth.

Toronto, Canada-based K.J. Harrison & Partners called for the breakup of New York-based MMC on Monday. The company said it holds more than a million shares of MMC stock and has owned them since 2004.

Jim Harrison, the chief executive officer of K.J. Harrison, said in a statement that the company wants shareholders to vote on a resolution to separate Kroll, MMC's risk management subsidiary, and Mercer, its consulting arm, from the insurance brokerage services of Marsh and Guy Carpenter.

“In our view, holding companies are effective only when they demonstrate they can add value through excellence in capital allocation and management selection and retention,” said Mr. Harrison. “Marsh & McLennan is currently doing neither.”

He said Marsh, “which was the gold standard,” is now falling far behind Aon Corp. and Willis Group Holdings in profitability. The fact that the company has been unable to retain good people, and therefore is losing business to competitors, underscores its inability to improve earnings. Both Mercer and Kroll's earnings are being hurt by Marsh's poor performance, he reasoned.

In an interview with National Underwriter, Mr. Harrison called the current combination inefficient and said that it was better to break them up than to try and replace current management. He conceded that should the company break up it could achieve the same result.

While he did not know what the odds are of the proposal actually getting on the agenda of MMC's annual shareholder's meeting, he said that if there are enough shareholders who share the firm's sentiments–and he believes there are–then there is a good possibility it would come up for a vote.

“We wouldn't go through all this trouble if we did not think this was a possibility,” said Mr. Harrison.

In an e-mail a representative with MMC said, “Marsh & McLennan's board always considers shareholder suggestions and is fully committed to enhancing shareholder value.”

(This story was updated Dec. 4 at 10:20 a.m.)

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Equity Firm Calls For Breakup Of MMC

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