Marsh & McLennan Cos. (MMC) on Tuesday said first-quarter profit fell 70 percent after the world's largest insurance broker was forced to forgo fees that sparked a bid-rigging probe.

Net income for New York-based Marsh fell to $134 million, or 25 cents per share, from $446 million, or 83 cents per share, a year earlier.

Marsh in January agreed to pay $850 million to settle a lawsuit by New York Attorney General Eliot Spitzer (search) accusing it of rigging bids, fixing prices, and steering business to insurers that paid fees which clients didn't know about. The company agreed to scrap these fees.

Results included $225 million of pretax charges for severance and employee retention, compliance matters and fund reimbursements at Marsh's Putnam Investments unit.

Excluding items, profit per share fell to 52 cents from 96 cents. On that basis, analysts polled by Reuters Estimates on average forecast 49 cents.

Revenue fell 0.4 percent to $3.18 billion. This included a 19 percent drop in risk management and broking revenue to $1.17 billion, and an even bigger decline in the United States.

"We do not want to sugarcoat the damage," Chief Executive Michael Cherkasky said on a conference call. "The numbers don't lie."

Marsh said it has eliminated about 5,000 of an expected 5,300 jobs, equal to 9 percent of its work force. In March it halved its stock dividend, and said it will spin off its MMC Capital private equity business to employees of that unit.

"The company is in a bottoming mode," said Wayne Bopp, an analyst for Fifth Third Investment Advisors in Cincinnati, which invests $34 billion of assets. "It is in the awkward transition process of trying to put regulatory and legal issues behind it. The bad news for Marsh and shareholders is that some of its customers and business are up for grabs."

In an interview, Cherkasky said "we have had incremental improvement in new business in April. That gives us hope that the message we're giving is getting out."

He also said: "If anyone is going to get compliance right in the future, it's Marsh."

Chief Financial Officer Sandra Wijnberg on the conference call said she expects $225 million of additional pretax charges this year, largely for severance and real estate.

Marsh shares fell 8 cents to $28.02 in afternoon trading on the New York Stock Exchange. Through Monday, they had fallen 39 percent since Spitzer sued the company last Oct. 14, while the Standard & Poor's insurance index fell 5 percent.

Revenue fell 11 percent in risk and insurance services to $1.75 billion, hurt in part by the end of some servicing agreements, lower premium rates and a decline in new business.

Investment management revenue fell 12 percent to $398 million. Putnam's assets under management fell 12 percent to $199 billion.

"We need to have a superior five-star, five-year ratings," Cherkasky said in the interview. "You can't do it in a year."

Consulting revenue rose 4 percent to $834 million, and risk consulting and technology revenue jumped tenfold to $264 million, reflecting the purchase of Kroll Inc.

Cherkasky, who used to run Kroll, took the helm at Marsh upon the ouster of Jeffrey Greenberg 11 days after Spitzer announced his probe.

Rivals Aon Corp. (AOC) and Willis Group Holdings Ltd. (WSH) agreed to pay a respective $190 million and $51 million to settle regulatory probes into their own practices.

In the interview, Cherkasky said Marsh's quarterly dividend of 17 cents per share looks safe. "I don't see any reason (our board of directors) would change it for the year," he said.