MARSH & MCLENNAN, the insurance broker, is to axe 3,000 jobs to help to prop up its flagging profits, which have been hurt by a $232 million (£125 million) charge to cover a potential settlement with Eliot Spitzer, the New York attorney-general.

The company said that about three quarters of the job cuts, which comprise 5 per cent of its workforce, would fall in its Marsh risk and services unit, which is at the centre of market-rigging allegations.

Mr Spitzer last month accused Marsh of steering the broker’s clients to insurers most likely to give lucrative “contingency commissions”, which are paid out for exceeding agreed sales targets.

Marsh announced the cuts as it unveiled a 94 per cent fall in third-quarter net income to $21 million (£11 million) on a 5 per cent rise in revenues to $2.96 billion. The company blamed the fall on a $232 million charge set aside as the “minimum expected liability” for any settlement with Mr Spitzer.

Profits were also dragged down by an agreed $40 million settlement of Securities and Exchange Commission civil fraud charges at Putnam, Marsh’s fund management subsidiary.

The company suspended its practice of so-called market services agreements, or contingency commissions, on October 15, the day after Mr Spitzer filed his lawsuit.

Marsh said that it would take a $325 million restructuring charge over the next six months to cover the job cuts, from which it hopes will save about $400 million a year. Michael Cherkasky, the new chief executive, said that 90 per cent of the employees to be sacked will be notified today.

On Monday Marsh ousted Roger Egan, its president, and Chris Treanor, chief executive of global placement, because although neither was accused of wrongdoing they were accountable for the business areas under investigation.

The dismissals follow the ousting of Julian Taylor, a senior vice-president of Marsh’s UK business, last week for alleged misconduct. Mr Taylor, an expert in Marsh’s anti-terrorism unit, is understood to have been accused of commission-related irregularities.

His departure came ten days after it emerged that Marsh had appointed Freshfields, the law firm, to investigate whether the unit’s London office was guilty of market abuse.

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