NEW YORK--Marsh & McLennan Cos. Inc. revealed Monday that its insurance brokerage unit, Marsh Inc., received $1.27 billion in contingent commissions over 18 months, including $845 million in 2003 and $420 million in the first half of 2004.
The 2003 figure represents 12% of Marsh's revenues in that year and 7% of the parent company's total revenues. The 2004 first-half figure represents 11% of Marsh's revenues and 7% of Marsh & McLennan's revenues, the New York-based brokerage said in a statement.
Marsh said that the total expenses directly associated with its global distribution activities were $340 million in 2003. That figure excludes certain local branch expenses, though, making it impossible to calculate the operating income that was derived from contingent commissions, which are also known as market service agreements, according to Marsh.
The announcement comes less than a week after New York Attorney General Eliot Spitzer sued the brokerage, charging it with fraudulent self-dealing and bid-rigging in its placement of clients' business. Among other things, Mr. Spitzer charges that Marsh steered business to insurers that paid it the highest contingent commissions.
Meanwhile, Mr. Spitzer's investigation of anticompetitive practices in the industry is broadening to include "tie-in" deals, in which brokers insist on handling an insurance company's reinsurance placements in return for producing business for that insurer, a source familiar with the investigation confirmed.
For reprints of this story, please contact Lauren Melesio at 212-210-0707 or email lmelesio@crain.com
