UPDATE 2-Investment firm wants Marsh to spin off two units

(Recasts first paragraph, adds analyst comment, updates stock movement)

NEW YORK, Nov 27 (Reuters) - A Toronto investment firm is seeking to force Marsh & McLennan (MMC.N), the largest U.S. insurance brokerage firm, to spin off its Kroll security consulting unit and its Mercer human resources business.

K.J. Harrison & Partners, a private client firm that says it controls about 1.1 million of Marsh's shares, said on Tuesday it filed a shareholder resolution with the company seeking the spin-off. It said the insurance broker's performance had "deteriorated financially and operationally" and that its strategy was flawed.

Marsh & McLennan has about 520 million shares outstanding.

"K.J. Harrison has a relatively small position, but this is the first time we've seen any shareholder activism" directed toward Marsh & McLennan, said Meyer Shields, an analyst with Stifel Nicolaus & Co.

Earlier this year Marsh & McLennan sold its Putnam investment company.

"Marsh & McLennan's board always considers shareholder suggestions and is fully committed to enhancing shareholder value," said company spokeswoman Christine Walton in response to the resolution. She declined further comment.

In aftermarket trading, Marsh & McLennan shares slipped to $24.25 for a time, but were later unchanged from their $24.44 close on the New York Stock Exchange. Since the start of the year, the stock has declined 23 percent.

In the third quarter, profit from continuing operations fell 40 percent at Marsh & McLennan due to "disappointing and unsatisfactory" performance at its brokerage unit, according to Chief Executive Michael Cherkasky. Standard & Poor's said it might cut its rating from its current BBB, the second lowest investment grade.

"The Harrison proposal might make sense," said Shields in an interview. "If the Marsh brokerage unit continues to founder it will hurt the other units because their stock compensation is tied to the whole company."

But Bill Bergman, an analyst with Morningstar, told Reuters that Marsh units were "mutually supportive" and the company was structured well as it currently existed. (Reporting by Ed Leefeldt; Editing by Tim Dobbyn)