Marsh To Cut Costs; Increase Transparency

Sandra Wijnberg, the company's chief financial officer, said there will be a lot of internal examination and tightening of management as the company deals with the loss of income after its announcement that its insurance brokerage subsidiary, Marsh, would no longer accept contingency fees.

MMC said that loss of the fees, the subject of a suit filed by New York Attorney General Eliot Spitzer, amounted to $845 million in revenue for the company?more than 7 percent of MMC's total income in 2003.

In terms of the company's financial strength, she said the company has "every ability to get through its cash and credit issues" with significant cash liquidity.

MMC has $700 million in cash it can deploy anywhere around the world, plus access to bank credit facilities. Ms. Wijnberg said because of the recent downgrades the company has limited access to outside investors and must rely upon operating cash flow and internal liquidity and bank credit.

The company has $5.4 billion of credit–$3.5 billion is long term, with maturity ranging from 2007 to 2033. There is $1.9 billion in commercial paper. MMC has obtained a waiver from the banks that would have barred it from using its credit facility in the face of litigation. The waiver extends to the end of December. MMC said it would negotiate access terms bankers are comfortable with, for the beginning of the year.

She said the company is "not on the verge of huge restructuring of charges" to clients; however, she and other executives were vague about how the company would make up the loss in revenue.

"We are very committed to looking very hard on the cost side of the company," said Michael G. Cherkasky, president and chief executive officer.

Adam Klauber, a managing director with Cochran, Caronia & Co. in Chicago, said, in response to a question from National Underwriter, that the future outlook for MMC is stable as a dose of reality sets in over investors. "People realize they are the biggest and are not going away," he noted.

MMC's stock, which had plummeted after Mr. Spitzer's announcement of a suit implicating the firm in price-rigging and market manipulation schemes in exchange for high contingency fees, has seen its stock increase to $28.01 by mid-afternoon, up 35 cents.

One question that does hang over the head of MMC, he noted, is how much the settlement will end up costing the firm. But whatever the outcome, he said, the company will survive.

During the call, Mr. Cherkasky noted that though MMC's problem is a "regulatory crisis, a leadership crisis, a crisis of confidence," it is not a "fundamental, business model crisis; nor is it, yet, a crisis that has caused us to lose employees or clients."

He said the new management team will provide "clear and decisive leadership" and that, overall, the company will become more transparent "than ever before" to ensure it keeps its client's trust.

"We can keep our clients if we keep their trust," he declared.