NEW YORK (AP) — Marsh & McLennan Companies Inc., the world’s biggest insurance broker, said yesterday that it was selling its Putnam Investments division to a Canadian financial services company for $3.9 billion in cash.The buyer is Great-West Lifeco Inc., a division of Toronto-based Power Financial Corp. The Canadian company has said it will retain the Putnam management team.

Marsh & McLennan’s president and chief executive, Michael G. Cherkasky, said in a statement that proceeds from the sale will go to “investing in our business, stock repurchases and debt reduction”.

Cherkasky told the Associated Press that “our first alternative” will be to shop for companies that are compatible with Marsh & McLennan’s remaining units: Marsh risk and insurance services, Kroll risk consulting and technology, and Mercer Human Resource Consulting.

Cherkasky also said that the decision to sell Putnam was based on the belief that “it didn’t fit with the clear focus of this company, to be a risk and human capital company”.

He added: “The risk space is where we play, and where we’re going to win.”

The deal, which was approved by both companies’ boards, is expected to close in the middle of the year, subject to regulatory approval, required client consents and other closing customary conditions, the companies said.

Raymond L. McFeetors, president and CEO of Great-West Lifeco, said the deal helps expand the company’s US market.

“This transaction gives us a strong presence in the growing US retail and institutional investment management markets and substantially strengthens our competitive position in international markets including Europe and Japan,” he said in a statement.

Marsh & McLennan was under pressure to spin off at least one of its businesses after agreeing in 2005 to pay $850 million to settle allegations of bid rigging and price fixing in the sale of property and casualty insurance to businesses. Part of the settlement was an agreement by Marsh & McLennan to stop accepting special commissions, which has reduced its operating revenue and hurt profitability.

Putnam Investments was the logical company to divest because it was the farthest from Marsh & McLennan’s core business and had been damaged by its own scandal.

Putnam paid more than $190 million to settle federal and state investigations launched in 2003 into mutual fund trading abuses.

Investors upset with the market-timing scandal pulled their assets out of Putnam accounts, reducing the Boston-based mutual fund company’s holdings from $251 billion at the end of 2002 to $182 billion at the end of September.

After months of declines, the company announced its first positive investment inflows in October.

Cherkasky said Marsh & McLennan wouldn’t have considered selling Putnam before that turnaround, adding “we felt there had to be at least neutral flows so we would be selling on the upswing”.

If the transaction is completed at the expected time, Marsh & McLennan said it would reduce 2007 earnings by about 5 cents a share.

Putnam had $192 billion assets under management at the end of 2006. It employs more than 3,000 people, mostly in the Boston area.

Separately, Putnam said it will remain headquartered in Boston, retaining its brand, operations, personnel and offices.

Putnam’s senior team is headed by president and chief executive officer Charles E. Haldeman, Jr.

Goldman, Sachs & Co. and Merrill Lynch & Co. acted as MMC’s financial advisers for the transaction. Davis Polk & Wardwell acted as MMC’s legal counsel.