NEW YORK (Bloomberg) — Marsh & McLennan Cos., the world's second-biggest insurance broker, said profit fell 78 percent amid the slowing US economy and price declines for commercial coverage and reinsurance. The shares dropped 5.5 percent.

Third-quarter earnings from continuing operations slipped to $18 million, or three cents a share, from $80 million, or 15 cents, a year earlier, the New York-based company said yesterday in a statement. The 2007 figure excludes a gain from selling the Putnam Investments asset management unit.

Chief executive officer Brian Duperreault, hired in January to restore profits, is eliminating jobs as declining insurance prices in the US squeeze the commissions the firm makes from matching buyers with sellers of coverage. Revenue at the insurance and reinsurance brokerage businesses rose one percent to $1.28 billion, and would have dropped if not for the effects of the conversion of non-US currency.

"The soft insurance cycle persisted," Duperreault said in a conference call with analysts and investors. "Difficult market conditions continue to affect results" for the reinsurance business.

Excluding the effect of currency fluctuations, acquisitions and divestitures, brokerage revenue declined one percent, compared with a two percent increase at larger rival Aon Corp.

Commercial insurance rates in the US fell 11 percent in the third quarter from the same period last year, extending a decline that began in 2004 as insurers competed for business, according to the Council of Insurance Agents and Brokers.

Profit at the division that comprises the Mercer and Oliver Wyman consulting firms increased 6.1 percent to $157 million. Earnings fell 3.4 percent to $28 million at the unit that includes the Kroll Inc. security and investigation business. Duperreault said in May that he is seeking buyers for parts of the underperforming security operation.

Marsh & McLennan had a net loss of $8 million on declines in the value of its private equity investments and an unprofitable quarter at businesses it has exited. That compares to a $1.95 billion profit a year earlier, when the company sold its Putnam unit. The firm had an investment loss of $23 million, primarily on private equity holdings, compared with a gain of $78 million in the same period a year earlier.

Excluding restructuring charges and other one-time items, profit was 21 cents a share, missing the 32 cent estimate of 12 analysts surveyed by Bloomberg.

The firm ranks second behind Chicago-based Aon according to a 2007 ranking of brokerage revenue by A.M. Best. Aon said on October 31 that third-quarter income from continuing operations rose 18 percent to $153 million as revenue gained outside the US.