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Companies are cutting back on insurance and examining the credit-worthiness of their insurers carefully, and both trends put a damper on first-quarter profits for broker Marsh & McLennan Cos. (MMC), though expense cuts improved profit margins.

"Many more clients are seeking alternatives" as a handful of major insurance companies face financial problems, said Daniel S. Glaser, chairman and chief executive of Marsh Inc., Marsh & McLennan's insurance broking subsidiary. "We are spending more time marketing existing business, leaving less time to get new business."

Some companies, especially among its biggest clients, are looking for ways to cut their insurance costs, he said. "Large accounts have more wherewithal in terms of reducing costs," by cutting the overall amount of coverage they buy."

Marsh & McLennan reported a profit of $176 million, or 33 cents a share, compared with a prior-year loss of $210 million, or 40 cents a share. The company reversed a year-earlier loss in the first quarter caused by a $425 million write-down of its Kroll security business as the insurance broker saw weaker operating results on woes at its consulting business. Excluding items such as the Kroll write-down, earnings fell to 40 cents a share from 45 cents.

Revenue decreased 13% to $2.63 million, or 4% on an underlying basis, which excludes acquisitions, divestitures and other impacts.

Glaser said an ongoing expense-reduction initiatives increased operating margin in the brokerage unit, even as it contributed to a decrease in revenue as the company stopped serving some accounts that billed less than $5,000 a year.

Meanwhile, the company agreed Wednesday to a $2.4 million settlement in a 4-year-old lawsuit filed by Connecticut Attorney General Richard Blumenthal related to alleged bid-rigging. When the suit was filed, Marsh agreed to pay $850 million to settle allegations by the New York attorney general of bid rigging and of steering business to insurers who paid Marsh the highest "contingent commissions."

The recession has weighed on the company's other operations, such as its consulting and technology segments.

Analysts surveyed by Thomson Reuters projected earnings of 43 cents a share on $2.95 billion in revenue.

The company's risk and insurance division, which includes its core insurance brokerage business Marsh Inc. and the Guy Carpenter unit, saw a 27% earnings increase as underlying revenue rose 1%.

Earnings excluding items at its Mercer and Oliver Wyman consulting businesses, more exposed to economic woes, were halved on reduced demand at Oliver Wyman. Underlying revenue decreased 7%.

Shares of Marsh & McLennan closed up 8.3% to $22.29.

- By Lavonne Kuykendall, Dow Jones Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com

Joan E. Solsman and Kevin Kingsbury contributed to this report.