Marsh & McLennen Looks To Get Back On Track With Duperreault At Helm

Brian Duperreault, who helped build a behemoth in Bermuda as chief executive officer of ACE Ltd. after over two decades at AIG, was tapped last week to help turn around another industry giant–Marsh and McLennan Companies Inc.

New York-based MMC said Mr. Duperreault's appointment as president and CEO was immediate. He left his post as a member of the board at ACE to join MMC.

News that Mr. Duperreault would be leading the troubled MMC was roundly applauded by analysts, who have been highly critical of the management of his predecessor as CEO, Michael G. Cherkasky.

“While he does not have insurance brokerage experience, his career at ACE and AIG should serve him well in this new role,” wrote David Small, a financial analyst with Bear Stearns.

Alain Karaoglan, an analyst with Bank of America, called the hiring “a significant positive” because of Mr. Duperreault's “immense experience in the [property-casualty] insurance arena” and his role at ACE.

“We think it was very important for MMC to bring in somebody from outside their organization,” said Greg Dickerson, a director with Fitch Rating Services in New York. “In Brian Duperreault they have brought in somebody with a very strong track record who will provide the benefit of an outsider's perspective on the challenges that Marsh faces. He also brings industry expertise and the relationships in place to help him hit the ground running without taking too long to get up to speed.”

Mr. Dickerson said that his years at ACE give Mr. Duperreault plenty of understanding about the value of insurance brokers. He added that there is plenty of experience at Marsh now, with the hiring of Daniel S. Glaser in December as its chairman and CEO.

William Wilt, an analyst with Morgan Stanley, wrote that Mr. Duperreault “faces many challenges…but opportunities are substantial. During his 10 years as CEO of ACE, Mr. Duperreault built an extraordinarily strong international insurance organization. In time, we think it reasonable to expect the new CEO can stabilize MMC's loss of brokerage market share and replenish its depleted human capital.”

“We frankly cannot imagine a better choice for the company,” wrote Meyer Shields, an analyst with Stifel Nicolaus. He said Mr. Duperreault can address MMC's ongoing weaknesses at Marsh, “including weak revenue growth, poor margin performance and low employee morale.”

Mr. Shields said Mr. Duperreault should be able to address these issues by attracting “significant talent” to the company, and predicted he will enjoy “greater success in winning higher revenue levels from both clients and insurance carriers.”

All the analysts said they felt the hiring of Mr. Duperreault would cease any speculation that MMC would be acquired by Willis or anyone else. Rumors about a possible sale resurfaced recently.

Fitch's Mr. Dickerson said he did not think the sale of MMC was an option, noting he is “somewhat skeptical that [Mr. Duperreault] would come out of retirement to dress up MMC for sale. But I wouldn't rule out divestiture of certain business units once he has had a chance to set his strategic vision for the company.”

Mr. Karaoglan said a takeover was less likely in the short term, with the MMC board making moves that indicate it wants to address the problems at Marsh. “We expect the revival of the insurance brokerage unit to be a major focus of management in the coming quarters,” he said.

“It is too early to tell whether Mr. Duperreault will keep or sell the non-insurance components of MMC,” said Mr. Shields.

“We suspect this news takes some of the M&A speculation out of MMC shares, as it is unlikely Mr. Duperreault came aboard to split up the company,” Mr. Small agreed.

MMC has been in crisis since 2004, when its key insurance brokerage unit–Marsh Inc.–was entangled in a scandal over its placement practices. That led to the resignation of MMC's CEO at the time, Jeffrey Greenberg, and resulted in the firm agreeing to give up lucrative contingent commissions that investigators said served as kickbacks in a price-fixing scheme.

Mr. Cherkasky took over Mr. Greenberg's post, negotiating a settlement with New York's attorney general at the time (now governor), Eliot Spitzer. The two had worked together as prosecutors earlier in their careers.

The brokerage's struggle to recover hit a low point last September when Marsh CEO Brian Storms was forced out of his post due to disappointing results during his tenure. To replace him, Mr. Cherkasky named Daniel S. Glaser–who began his career at Marsh, before moving on to senior positions at Willis and AIG.

MMC Chairman Stephen R. Hardis hailed the new CEO's arrival. “Throughout his career, including 10 years as a CEO, Brian Duperreault has proven his ability to produce results and create shareholder value. We are delighted to welcome him to MMC,” he said in a statement.

“I am honored to become the CEO of MMC, a company that comprises several of the world's greatest brands in risk and insurance services and consulting,” said Mr. Duperreault, in the same company statement. “I look forward to working with the company's talented executives.”

He added that MMC is “an institution with unrivaled resources and capabilities. My mission is to capitalize on the strength of MMC's operating companies to deliver value to clients, employees and shareholders.”

From 1994 to 2004, Mr. Duperreault served as CEO of ACE Ltd., the Bermuda-based insurer MMC helped found in 1985. He served as ACE chairman from 2004 to 2007. ACE's net premiums are currently $12 billion.

Describing Mr. Duperreault's tenure at ACE, MMC said he had grown the firm “from a boutique catastrophe insurance specialist into a global multiline commercial enterprise. He presided over significant organic growth as well as the acquisition of several businesses, including the 1999 acquisition of Cigna's property and casualty business.”

Under Mr. Duperreault, ACE's market capitalization grew from $1.1 billion to approximately $19 billion today.

Prior to ACE, Mr. Duperreault was with American International Group for more than 20 years, holding numerous positions, eventually becoming executive vice president of AIG Foreign General Insurance and chairman and CEO of AIG's American International Underwriters, which comprises all of AIG's non-U.S. commercial business.

Jeffrey Greenberg's brother, Evan Greenberg, ACE's chairman and CEO, issued a statement wishing Mr. Duperreault the best with his job at MMC, which he called “a great global franchise and an important presence in our industry.”

He added that “we have every confidence that Brian will provide the same exceptional leadership to Marsh and McLennan that he gave to ACE for so many years, and for which we will always be grateful. We look forward to working with Brian and all of his new colleagues.”