Marsh & McLennan Cos. Inc. has moved out of the defensive position it adopted following the compensation scandals that tainted the company in 2004 and 2005, and is focused on developing products and services that meet the evolving needs of its global client base, its top brokerage executive says.

New York-based Marsh Inc., MMC's brokerage unit, concentrated on protecting its franchise in 2004 and 2005, after an $850 million settlement of bid-rigging and client steering allegations by then-New York Attorney General Eliot Spitzer, but last year the company refocused on growing its business, said Brian Storms, chairman and chief executive officer.

A critical part of its strategy is innovation, he said. For example, in January, Marsh helped form MaRI Ltd., an acronym for Marsh Risk Innovations, a sidecar insurer that offers working-layer property catastrophe capacity (BI, Jan. 15). Marsh plans to launch proprietary solutions for workers compensation and oil and gas risks later this year.

The issue of broker compensation, though, was once again thrust forward when rival brokerage Willis Group Holdings Ltd. announced that it would not accept supplemental commissions when it represents insurance buyers.

The issue is more complex than simply debating supplemental vs. contingent commissions, Mr. Storms said. Marsh won't accept commissions tied to business volume, but it is "willing to have a discussion with markets about being paid for certain services" Marsh provides to underwriters, he said.

"We are working through that and when we have something publicly to disclose, we will," he said. "But not in the form of supplementals, not in the form of contingents. Anything that we ultimately arrive at will be fully disclosed, completely transparent. Everyone will know precisely what we're doing."

The loss of contingent commission income was a key contributor to the company's reduced earnings in recent years, but in 2006 MMC's brokerage revenues increased 3.9% to $10.47 billion. In the first quarter of 2007, MMC reported gross revenues of $2.81 billion, up 5.2% over a year earlier.

Continuing its efforts to divest non-core business units, MMC announced the $3.9 billion sale of Putnam Investments, its investment management unit tarnished by trading scandals, to Winnipeg, Manitoba-based Great-West Lifeco Inc.

Speculation about the future of Marsh has been rampant, particularly in light of major private equity deals involving other large brokers, but Mr. Storms said Marsh is a public company and a dominant part of MMC. Whatever the long-term structure of the company, nothing will change in terms of the execution of its strategy, he said.

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