Layoff Plans With MMC Earnings Report?

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 questions over its financial future foreshadow Marsh & McLennan's release tomorrow of its fourth-quarter earning's results.[@@]

MarketWatch from Dow Jones said as many as 1,000 employees companywide could get the axe as New York-based MMC looks to trim costs, and a British publication said hundreds could lose their jobs there.

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

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

Last week, the company began a public relations offensive with an open letter titled "The New Marsh: Making changes to restore your trust."

Barbara Perlmutter, senior vice president of public affairs for MMC, said the letter appeared in a number of major newspapers throughout the country. It was the first in a series of advertising campaigns the company plans to do to reclaim its image.

As far as additional layoffs, she could not comment but indicated that the Tuesday earnings release would answer the question.

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

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

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