NEW YORK (Reuters) - Insurance broker Willis Group Holdings Ltd. has approached bigger rival Marsh & McLennan Cos with a view to starting talks about a possible takeover of Marsh & McLennan, according to a report on CNBC television yesterday afternoon.

Willis, the world's third-largest insurance broker, and Marsh & McLennan both declined to comment. Both companies have operations in Bermuda.

Marsh & McLennan shares closed 3.14 percent higher at $27.28, giving the broker a market value of roughly $14.2 billion. Willis has a market value of roughly $5.2 billion, according to Reuters Estimates.

In December, Marsh & McLennan said it would replace CEO Michael Cherkasky following a year of disappointing results and noted it would evaluate strategies to boost shareholder value, which is often considered code for a possible sale of assets. Cherkasky had been under pressure since October 2004, when he took over in the middle of a bid-rigging scandal in which the company faced charges from then-New York Attorney General Eliot Spitzer.

Marsh & McLennan also faces challenges from investors who might want the company broken up. Companies controlled by activist billionaire Nelson Peltz recently received approval from the US Federal Trade Commission to take a stake in Marsh & McLennan.

In August, Marsh & McLennan sold its Putnam asset management unit to Canada's Great-West Lifeco Inc for $3.9 billion, and a Toronto investment firm is trying to force Marsh & McLennan to spin off its Kroll security consulting unit and Mercer human resources business.

James Harrison, chief executive of Toronto-based investment firm K.J. Harrison & Partners, said yesterday that Marsh is definitely in play, given its recent moves to oust the CEO, review businesses and now, the apparent interest from Willis. "They have the wherewithal to take it all on," Harrison said of Willis. Shareholders would be "thrilled" if Marsh could get an auction going and generate a higher share price immediately, Harrison said. Then any investors who are patient enough to wait for a turnaround at Marsh could own shares in the acquirer, Harrison said.

Harrison's firm owned 1.1 million Marsh shares at the end of December. It bought the stake around three years ago in the belief that the company was worth more than the sum of its parts, Harrison said.

"I think shareholders are very tired of this company," Harrison told Reuters. "It's been a terrible investment."

In November, K.J. Harrison & Partners filed a shareholder resolution with Marsh, seeking a spin-off of its Kroll security consulting unit and its Mercer human resources business.

• Marsh & McLennan Cos. is to increase its dividend 5.3 percent to 20 cents a share.

The dividend is payable on February 15 to shareholders of record on January 28, the insurance broker said yesterday in a statement on Business Wire.