Under investigation by New York Attorney General Eliot Spitzer in a bid-rigging probe, insurance brokerage Marsh & McLennan announced today that it is laying off 3,000 people, roughly 5% of its workforce.

The company said it was slashing jobs “based on the realities of the marketplace and our current situation.”

It said most of the layoffs will come from its risk and insurance business, but some jobs will be cut at mutual fund and wealth management firm Putnam Investments and consulting firm Mercer Inc.

Spitzer announced a civil lawsuit against the company on October 14, alleging that Marsh & McLennan also engaged in price-fixing.

The insurer said it has established a US$232 million reserve for any settlement of the New York attorney general’s probe.

The announcement of the cuts came as the company reported third-quarter earnings well below analysts’ estimates. It also disclosed that it has reached a US$40 million “settlement agreement in principle” with the Securities and Exchange Commission over questionable brokerage allocation practices at Putnam.

In its earnings report, Marsh & McLennan said net income fell to US$21 million, or US4¢ a share, in the third quarter from US$357 million, or 65¢ a share, a year earlier.

Revenues rose 5% to US$3 billion in the quarter, the company said.