MMC Capital's chief executive Charles Davis is to lead a management buy-out of the private equity firm from its parent, the broking giant Marsh & McLennan Companies.
The former Goldman Sachs banker confirmed that the firm will be spun-out of MMC by the end of the month.
According to Davis - who joined MMC Capital as president in 1998 - MMC will continue to be the largest investor in the group's funds but will no longer have any direct ownership of the business or involvement in its decisions.
MMC has been under pressure to relinquish its control of the private equity firm ever since the New York attorney general Eliot Spitzer sparked an investigation into the broking giant and, more widely, relationships within the insurance industry. MMC Capital has been a pivotal financier of the industry - providing over $3bn of funding for insurers such as Axis Specialty - via MMC's Trident Funds.
In December 2004, MMC confirmed that it had received a request for information about "related party transactions" and said it intended to co-operate fully with the SEC's investigation. The SEC's request followed criticism from Spitzer about the relationship global brokers such as Marsh and Aon had in sponsoring insurance companies' start-ups. MMC's chief executive Michael Cherkasky has also acknowledged that the private equity arm does not sit "neatly" in the new culture.
The move was widely expected after being first predicted in the January edition of The Insurance Insider (see "MMC Capital: Close to spin-off?").
One intriguing prospect, however, may be the possible return of Jeffrey Greenberg, the chief executive of MMC ousted from the broking giant following Spitzer's allegations. They worked together at MMC Capital and Davis served as MMC's vice-chairman with Greenberg as chairman and chief executive. Cherkasky removed all of the executive directors - including Davis - from MMC's board of directors when he replaced Greenberg last year.