Marsh pension fund hit by share collapse

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The Independent Online

More than half the pension fund at Marsh & McLennan, the insurance broker accused of rigging bids to make inappropriate fees from customers, is invested in the company's stock, making the slump in its shares a particularly bitter blow for employees.

More than half the pension fund at Marsh & McLennan, the insurance broker accused of rigging bids to make inappropriate fees from customers, is invested in the company's stock, making the slump in its shares a particularly bitter blow for employees.

Marsh shares lost almost half their value after Eliot Spitzer, New York's attorney general, last Thursday launched a lawsuit alleging the world's largest insurance broker orchestrated a scheme to manipulate customers into taking out more expensive policies than they could have found in the market.

Rivals of Marsh have privately admitted they are circling the embattled broker to tempt away its employees. They believe the hit to Marsh's pension fund could be enough to tempt many to leave at a time when the company's future is uncertain.

Meanwhile the company's UK arm has reportedly hired the giant law firm Freshfields to investigate whether it too could come under suspicion of price fixing and collusion. Bruce Carnegie-Brown, the head of the British business, has ordered the conclusions of the probe within a month, in an attempt to shore up employee and customer confidence.

Marsh writes at least £2.5bn of insurance premiums through the Lloyd's of London insurance market and controls a network of 30 offices across the UK.

Industry insiders said Marsh would have problems persuading staff not to abandon the company because the US broker is well known for paying middle-ranking employees as well as senior executives in stock and stock options as well as cash.

A senior insurance broker at another company said: "They will lose people. If you have got lots of stock options at $58 and your share price is $30, you are not going to be happy."

Marsh shares closed at $46.13 on 13 October, the day before Mr Spitzer announced the investigation. They were trading at $26.79 on Friday, having recovered ground on speculation that the company's independent directors were preparing to oust Jeffrey Greenberg, the chief executive. Marsh would not comment, but it seemed increasingly likely that Mr Greenberg would step aside within days.

Four Marsh employees have already been suspended in the wake of Mr Spitzer's lawsuit.

Employees of scandal-hit companies have suffered a double blow because of the impact on their pension funds before. The most notable example was in the case of Enron, where thousands of staff not only lost their jobs just before Christmas but also much of the value of their pensions because the energy giant had invested its retirement heavily in Enron's shares.

While pension fund managers were encouraged to cut the amount of the parent company's stock in the fund after the Enron debacle, the practice is still pursued by many major US corporations.

Meanwhile, the US press reported that Mr Spitzer was considering widening his probe into other potential conflicts of interest across the insurance industry, including allegations of bid-rigging, collusion and the misuse of arbitration proceedings for customers.

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