MMC to rise above scandals

Buck Ennis Of all the firms targeted by Eliot Spitzer when he was cleaning up abuses on Wall Street, none suffered more than Marsh & McLennan Cos. In 2004, Mr. Spitzer--then New York's attorney general--forced the world's largest insurance broker to stop rigging bids, which cost it $850 million in annual commissions. Chastened, Marsh replaced top management. But it never found a way to replace the lost revenues, and its stock price has gone nowhere ever since. At long last, there are good reasons to jump back into the market for shares of this reawakening giant. Last month, Marsh hired a veteran insurance official to replace Chief Executive Michael Cherkasky, who resolved the company's legal problems but was out of his depth when it came to repairing its core insurance business. But to assuage continuing concerns, new CEO Brian Duperreault must address Marsh's most glaring problem: falling profit margins. The firm, once the most profitable in its sector, saw margins in its key risk and insurance division fall to 11% over the nine months ended Sept. 30--a fraction of 2003's pre-scandal level of 25%. In contrast, top rival Aon Corp. posted margins of 17% last year. Analysts are betting that Mr. Duperreault, previously the CEO of insurer Ace Ltd., will have better ideas for boosting employee productivity than his predecessor, a former prosecutor. The next issue is whether to streamline Marsh, which owns the Mercer and Oliver Wyman consulting firms as well as security firm Kroll. Marsh's stock price has fallen by a third over the past five years, while share prices for its peers have been flat. The company will report full-year results on Tuesday.