Fitch Ratings upgraded the previously assigned Issuer Default
Rating (IDR) and senior unsecured debt rating to "BBB+" from
Marsh & McLennan Companies, Inc.
). The rating carries a stable outlook.
The ratings upgrade came on back of the company's consistent
improvement in its operating performance and robust credit
metrics since the second half of 2010. The EBIT operating margin,
debt-to-EBITDA ratio and EBITDA-to interest coverage ratios of
Marsh & McLennan have been strong enough to be accounted for
in the ratings upgrade.
Marsh & McLennan, which occupies an important position in the
insurance brokerage and consulting market, has a strong financial
flexibility which is reflected in the ratings. Moreover, settling
down the periodic restructuring charges as well as regulatory and
legal issues that had been adversely affecting the company
financials for several years are also reflected in the ratings.
Fitch expects the gradual improvement in the commercial pricing
and macroeconomic environment as well as Marsh & McLennan's
manageable pension contributions to augment its operating
performance in the upcoming periods. However, potential goodwill
risk and occasional litigation distractions are some of the
factors that might dwarf the positives.
Fitch stated that the ratings or rating outlook might be revised
upward owing to sustained consolidated EBIT operating margins of
15% or more along with debt-to-EBITDA ratios consistently below
1.3 and EBITDA-to-interest ratios maintained in excess of 12.0x.
On the other hand, a downgrade in rating or rating outlook could
result from deterioration in the company's EBITDA-to-interest
coverage ratio below 8.0x and the debt-to-EBITDA ratio above
2.0x. Material charges from litigation or regulatory issues might
also invite a downward revision in the ratings.
Rating affirmations or upgrades from credit rating agencies
play an important part in retaining investor confidence in the
stock as well as maintaining the creditworthiness in the market.
We believe that the company's present score with the credit
rating agencies will help it write more business going
Last September, Standard & Poor's Ratings Services
(S&P) reiterated the 'BBB-' counterparty credit rating, on
Willis Group Holding PLC
), another insurance broker. The rating was downgraded to stable
from positive based on the rating agency's expectation that
Willis will be unable to meet its standards.
Marsh & McLennan currently carries a Zacks Rank #3 (Hold).
Among others from the industry,
) carries a favorable Zacks Rank #1 (Strong Buy) whereas
Brown & Brown Inc.
) carries a Zacks Rank # 2 (Buy) and are worth noting.
BROWN & BROWN (BRO): Free Stock Analysis
EHEALTH INC (EHTH): Free Stock Analysis
MARSH &MCLENNAN (MMC): Free Stock Analysis
WILLIS GP HLDGS (WSH): Free Stock Analysis
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