Fitch Ratings affirmed
Marsh & McLennan Companies, Inc.
) issuer default ratings ("IDR") of "BBB" and senior unsecured debt
rating of "BBB" on June 5. The outlook for all ratings remains
The rating affirmation came on the back of strong balance sheet
figures, improved operating performance, sound cash position and
its efficiency in meeting its debt obligations. The company has
been registering good operating numbers and strengthening its
credit worthiness since last year.
As of March 31, 2012, the company had cash and cash equivalents
of $1.4 billion. It also sustains a multicurrency unsecured
revolving credit facility of $1 billion until its expiration in
October 2016. Also, there was no further borrowing of funds under
this facility until the first quarter of 2012.
For the first quarter ended 2012, the company registered a
pre-tax profit margin of 17.4%, up 80 basis points (bps) from the
year-ago quarter. Its debt-to-annualized EBITDA ratio and EBITDA-to
interest coverage stands at 1.2x and 13.4x, respectively. These
impressive numbers helped it gain the rating affirmation from
Fitch. The numbers signify the company's financial flexibility and
adroitness in meeting interest payments and other debt
For the year ended 2011, pre-tax profit margin improved 530 bps
year over year to 14.4%. The company's debt-to-EBITDA ratio was at
1.5x and EBITDA-to-interest-coverage ratio was at 10x.
In 2011, the company paid $400 million towards litigation
settlements. It is still recovering from the overhang of large
expenses incurred towards business restructuring in an unfavorable
The ratings agency expects the financials of the company to
remain at its reported level in the short run. If the company
continues to perform well in the upcoming quarters, the rating
agency may upgrade its ratings.
However, if the debt-to-EBITDA ratio exceeds 3.0x along with
EBITDA-to-interest-coverage ratio declining to the low single
digits, or if there is an increase in expenditure arising out of
litigation or regulatory issues, the ratings would be downgraded by
Marsh & McLennan pioneers its operational sector with
various services offered in the field of insurance brokerage and
consulting. The company has a trailing 12-month return on equity
(ROE) of 15.44%, almost double compared with the sector average of
7.77% and way ahead of 4.37% for its closest peer
The company's stock prices have been exhibiting an increasing
trend over the last four days and now with the ratings affirmation,
we expect its share price to increase further.
Marsh & McLennan retains a quantitative Zacks #3 Rank, which
translates into a short-term Hold rating. We also maintain a long
term Neutral recommendation on the stock.
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