Fitch Upgrades MMC's Issuer Default Rating to 'BBB+'; Outlook Stable

NEW YORK--()--Fitch Ratings today upgraded its Issuer Default Rating (IDR) and senior unsecured debt rating for Marsh & McLennan Companies, Inc. (MMC) to 'BBB+' from 'BBB'. A full list of rating actions appears at the bottom of this release. The Rating Outlook is Stable.

The ratings upgrade reflects the continuation of MMC's trend of improved operating performance and stronger credit metrics that began in the second half of 2010. MMC's consolidated EBIT operating margin, debt-to- EBITDA ratio, and EBITDA-to interest coverage ratios have each been consistently strong relative to the current rating category.

MMC also appears positioned to sustain or possibly improve its recent performance in the near to medium term due to a modestly improving commercial pricing environment and gradually improving macroeconomic environment.

Fitch also notes favorably that the periodic restructuring charges and regulatory and litigation distractions that hampered the company's results for several years prior to 2011 have subsided.

In the first nine months of 2012, MMC's consolidated EBIT operating margin improved to 16.4% versus 14.9% in the prior year period. The company's Risk & Insurance Services (RIS) and Consulting segments both reported healthy organic revenue growth and margin expansion during the period.

Also in the first nine months of 2012, MMC's debt-to-annualized EBITDA ratio and EBITDA-to interest coverage ratios both improved year over year and are strong for the current rating category at 1.3x and 12.7x, respectively. Fitch expects both ratios to remain at or near these levels in the near to medium term.

The rationale for MMC's ratings includes the company's competitive position as one of the world's largest diversified services firms, with major operations in insurance brokerage and consulting.

The ratings also reflect MMC's strong financial flexibility. MMC reported approximately $2 billion of cash and cash equivalents on its balance sheet as of Sept. 30, 2012, and also maintains a $1 billion multicurrency unsecured revolving credit facility that expires October 2016. There were no borrowings under this facility as of Sept. 30, 2012.

Partially offsetting these favorable factors is the company's large goodwill and intangible asset position, which currently comprises 109% of MMC's common equity and highlights the risk associated with potential goodwill write-downs. Similar to other insurance brokers that Fitch rates, MMC's ratings also reflect that the company faces contingent risks as an occasional target of litigation.

MMC's pension obligations have remained in a significantly underfunded position for the past several years, despite MMC having made significant contributions toward its pension plans in each of the past several years. Fitch expects MMC's pension contributions for the foreseeable future to remain manageable.

Sensitivity/Rating Drivers:

Longer term rating triggers that could result in a Positive Rating Outlook or upgrade include sustained consolidated EBIT operating margins of 15% or better, accompanied by debt-to-EBITDA ratios consistently under 1.3 and EBITDA-to-interest ratios consistently in excess of 12.0x.

Key ratings triggers that could lead to a Negative Rating Outlook or rating downgrade if observed over a sustained period of time include MMC's debt-to-EBITDA multiple exceeding 2.0x or the company's EBITDA-to-interest coverage ratio deteriorating to levels below 8.0x. Additionally, Fitch could downgrade MMC's ratings if the company incurred additional, material charges arising from litigation or regulatory rulings.

Fitch has upgraded the following ratings and assigned a Stable Rating Outlook:

Marsh & McLennan Companies, Inc.

--IDR to 'BBB+' from 'BBB';

--$250 million 4.85% senior debt due 2013 to 'BBB+' from 'BBB';

--$320 million 5.375% senior debt due 2014 to 'BBB+' from 'BBB';

--$480 million 5.75% senior debt due 2015 to 'BBB+' from 'BBB';

--$250 million 2.30% senior debt due 2017 to 'BBB+' from 'BBB';

--$400 million 9.25% senior debt due 2019 to 'BBB+' from 'BBB';

--$500 million 4.80% senior notes due 2021 to 'BBB+' from 'BBB';

--$300 million 5.875% senior debt due 2033 to 'BBB+' from 'BBB'.

In addition, Fitch has affirmed the following ratings with a Stable Outlook:

Marsh & McLennan Companies, Inc.

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:

--'U.S. Insurance Broker Industry Sector Credit Factors' (May 4, 2012);

--'Corporate Rating Methodology' (Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

U.S. Insurance Broker Industry Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677409

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