NEW YORK (Bloomberg) — Marsh & McLennan Companies, the world's largest insurance broker, has ousted chief executive officer Michael Cherkasky after the stock trailed competitors for three years, and directors signaled they may break up the company.

Marsh & McLennan rose in New York trading last Friday as chairman Stephen Hardis promised a new strategy to raise the share price. Cherkasky, 57, will remain at New York-based Marsh & McLennan while a successor is sought.

Cherkasky, a former prosecutor hired in 2004 to settle a bid-rigging probe, sought to restore sales and win back clients by getting his brokerage, consulting, and investigations businesses to sell each other's services. The strategy failed, and the shares fell 5.8 percent during his tenure through last Thursday, while more than doubling at number two Aon Corporation.

"He was not the right man for the job," said Stanley Nabi, who helps oversee about $8 billion at New York-based Silvercrest Asset Management Group and who sold most of his Marsh & McLennan shares in the past two years. "He cleaned up the company there legally, but he's not an insurance person."

The firm's 2007 performance "has fallen far short of our expectations," Hardis said in a statement. The directors plan to review the "mix of businesses," which may lead to the breakup advocated by shareholders including Jim Harrison of Toronto-based K.J. Harrison & Partners.

Marsh & McLennan stock will be worth more than $30 if it spins off its Mercer human resources and Oliver Wyman consulting units and its Kroll investigations arm, even without any improvements in the underlying businesses, Harrison estimates.

"There's a lot of hidden value there," he said in an interview.

After pressure from investors, Cherkasky sold the company's Putnam Investments mutual fund unit in August to Montreal-based Power Financial for $3.9 billion. He resisted calls for a further breakup, arguing that his strategy of "cross-selling" makes the units more valuable together than they are alone.

Cherkasky, a veteran prosecutor who once served as Eliot Spitzer's boss in the Manhattan District Attorney's office, entered the business world in 1994 by joining Kroll. He rose to chief executive in 2001, and remained when Marsh & McLennan bought the company in 2004.

His background proved useful when Spitzer, then the New York attorney general and now its governor, opened a probe into bid-rigging and sued the company. CEO Jeffrey Greenberg was forced out after Spitzer refused to negotiate with him. Cherkasky got the job and reached an $850 million settlement.

The financial damage continued as Marsh & McLennan lost about $845 million a year in payments from insurers that Spitzer had labelled "kickbacks." The probe also hurt the company's reputation and scattered Marsh's customers at the same time that falling prices for commercial insurance reduced commissions for helping corporations find coverage.

Cherkasky cut more than 6,000 jobs, or about 10 percent of the workforce, and vacated some floors of the firm's Manhattan headquarters. His choice to lead the flagship Marsh brokerage business, Brian Storms, replaced a third of his 65 US office heads and launched the company's biggest advertising campaign.

Storms was fired in September after two years of stagnating brokerage revenue, and replaced with Daniel Glaser of American International Group, the world's biggest insurer by assets.

Marsh & McLennan spokeswoman Christine Walton said Cherkasky and Hardis declined to be interviewed. Cherkasky's three-year employment contract expires on July 20.

Whoever the next CEO is, "he's got to consider breaking up the company," said analyst Robert Haines at CreditSights in New York.

"They're still a hodgepodge of businesses pushed together. I don't see the synergy of having a world-class insurance broker as part of a consulting firm."

Mercer, Oliver Wyman, and Kroll together contributed $1.48 billion, or 52 percent, of third-quarter sales. Together, they could be worth as much as $20.19 a share, or about $10.5 billion, according to Keith Walsh, an analyst with Citigroup in New York. He values the whole company at $30.48 a share, or about $15.8 billion.

He rates the shares "hold."