Marsh & McLennan Cos Inc , the No. 2 global insurance broker, posted quarterly results in line with expectations on Wednesday and forecast improved profitability for its brokerage business, sending its shares up 4.3 percent.

The company reported a second-quarter net loss, hurt by the continuing restructuring of Kroll, its security consulting business.

But excluding one-time items, it posted a profit that matched Wall Street's average forecast and said it expects improvement in profit at its brokerage business for the full year.

Citigroup analyst Keith Walsh, in a research note, said the key take-away is the brokerage margins expanded much faster than anticipated, posting a second consecutive quarter with margins above 20 percent.

For the full year, Chief Executive Brian Duperreault set an adjusted margin target for its brokerage segment of 18 percent, up from a previous target of 17 percent and higher than the 13.3 percent reported for 2008.

The segment is comprised of Marsh Inc, the company's insurance brokerage, and Guy Carpenter, a reinsurance brokerage.

While falling insurance rates in recent years have cost brokers, who are largely compensated by commissions, most have curbed spending, helping to cushion the bottom line.

New York-based Marsh & McLennan, which competes with Aon Corp in helping businesses find commercial insurance coverage, said revenue in the second quarter fell 13 percent to $2.6 billion. This was partly offset by a 16 percent drop in compensation and operating expenses to $2.3 billion.

Once the world's largest insurance brokerage, MMC faltered after a 2005 investigation into commission agreements with insurers it represented, triggering a costly settlement charge and loss of business. Over time, it lost its dominant position to Aon.

But investors hope MMC is about to turn a corner. It is under new management and could benefit if rules governing the acceptance of commissions are relaxed.

A recent regulatory agreement paved the way for smaller rival Arthur J. Gallagher to accept commission payments from insurers, once a common practice that added hundreds of millions of dollars in revenue for the biggest brokerages.

Marsh Inc CEO Dan Glaser on Wednesday said he hoped the same rules would be applied to all brokerages, and that MMC's earlier settlement agreement, which banned the acceptance of some commissions, would be allowed to expire.

RESTRUCTURING PAIN

Duperreault, who joined MMC last year, has cut thousands of jobs, trimmed discretionary spending and sold off unwanted assets, including units of Kroll, MMC's security consulting business.

These steps have increased the company's underlying profitability and helped it cope with fallout from the recession, Duperreault told investors on a conference call Wednesday.

We are not only weathering the storm but performing well, he said.

Still, the restructuring took a toll on second-quarter results, and the company warned it could see more charges in the third quarter.

The company's $193 million net loss in the quarter, equal to a loss of 37 cents a share, compared with a year-earlier profit of $65 million, or 12 cents a share.

MMC's sale of a Kroll unit triggered a goodwill review, resulting in a charge of $315 million, or 60 cents a share.

The company also recorded $31 million in losses stemming from the declining value of its private equity investments.

Excluding special items, MMC earned 33 cents a share, in line with analysts' expectations, according to Reuters Estimates.

MMC shares were up 93 cents to $22.43 in morning trade on the New York Stock Exchange.

(Reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace)

Citigroup