Marsh & McLennan
shares were rising 4% after the beleaguered insurance broker said it was on the hunt for a new CEO to replace Michael Cherkasky and was considering its strategic options.
Cherkasky, who joined the company in 2004 to navigate it out from under a bid-rigging investigation by then-New York Attorney General Eliot Spitzer, will continue to serve as CEO until a replacement is found.
A change in leadership "will best enable
Marsh & McLennan to move forward and enhance shareholder value," the company said Friday in a press release.
Marsh & McLennan's "financial performance in 2007 has fallen far short of our expectations," said Stephen Hardis, the company's non-executive chairman. "The board has taken this performance into account and listened to concerns raised by some of the company's largest shareholders in recent quarters, in making this recent change."
Cherkasky took over as CEO and president of the New York-based firm after Spitzer had launched an investigation into the company's business practices, including whether it rigged bids and fixed prices on commissions. The investigation led to the resignation of the company's CEO and an $850 million settlement.
The company's mutual fund arm, Putnam Investments, was also involved in the mutual-fund trading scandal brought to the forefront by Spitzer. Marsh & McLennan sold Putnam to Great-West Lifeco, a unit of Power Financial of Canada, for $3.9 billion in August.
"The board will continue to actively oversee
Marsh & McLennan's portfolio of businesses and evaluate strategies to enhance shareholder value, including optimizing the company's capital structure, reviewing its mix of businesses and improving operating performance, particularly at Marsh," it said.
Marsh, its insurance broker and risk advisor subsidiary, has been without a head since mid-September when Brian Storms, its former CEO, stepped down. Earlier this month, the company named Dan Glaser, a former
executive and former Marsh employee, to become Marsh's CEO and chairman.
Marsh & McLennan "is a venerable institution that might not be here today were it not for Mike Cherkasky," Hardis said. "His leadership and crisis management skills in the wake of the New York Attorney General's action in 2004 enabled
the company to weather a perfect storm and positioned the company for future growth."
Shares were rising more than 4% on Friday, after some market participants speculated that the firm was considering a sale of some units or of the entire company.
But Kathleen Shanley, a senior investment grade analyst at Gimme Credit, remains cautious of the outlook for Marsh & McLennan.
"Shares are down 16% this year, even as rival Aon has seen its stock climb 38%. Some of
the company's large shareholders are pushing the company to consider breaking up the company by spinning off its Kroll and Mercer subsidiaries," she wrote in a note. "Such a move could weaken bondholder protection, by reducing the diversity of the company's operations."
In addition, the company "has periodically been rumored as a potential LBO candidate, and this possibility could be one of the options considered again in the coming year," Shanley wrote. "Our credit score remains 'deteriorating' as investors face a period of uncertainty as MMC considers its options."