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Fitch Affirms Marsh & McLennan's Ratings at 'BBB+'; Outlook Stable
May 29, 2014 / 2:11 PM / 3 years ago

Fitch Affirms Marsh & McLennan's Ratings at 'BBB+'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, May 29 (Fitch) Fitch Ratings has assigned a rating of 'BBB+' to Marsh & McLennan Companies, Inc.'s (MMC) new issue of $600 million of 3.50% senior notes due 2024. Fitch has also affirmed MMC's Issuer Default Rating (IDR) at 'BBB+'. A full list of rating actions follows at the end of this release. The Rating Outlook is Stable. KEY RATING DRIVERS The affirmation reflects Fitch's expectation for a continuation of MMC's trend of improved operating performance and stronger credit metrics that has persisted for several years. 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 and are projected to remain so following the incremental debt issue. In 2013, MMC's debt-to-EBITDA ratio and EBITDA-to interest coverage ratios both improved year over year and are strong for the current rating category at approximately 1.2x and 15x, respectively. Fitch estimates that pro forma for the new debt issue, MMCs 2013 debt-to-EBITDA and EBITDA-to interest coverage ratios would have been 1.4x and 13x respectively. MMC appears positioned to sustain its recent performance levels in the near to medium term due to a largely stable commercial pricing environment and gradually improving macroeconomic environment. In the first quarter of 2014, MMC's consolidated EBIT operating margin improved to 21.2% versus 20.2% in the first quarter of 2013. The company's Risk & Insurance Services (RIS) and Consulting segments both reported organic revenue growth and margin expansion during the period. Given MMC's prospects for solid earnings growth in 2014, Fitch therefore expects these key credit metrics to remain strong for MMC's current rating category. MMC's rating rationale 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 $1.3 billion of cash and cash equivalents on its balance sheet as of March 31, 2014, and also maintains a $1.2 billion multicurrency unsecured revolving credit facility that expires in March 2019. There were no borrowings under this facility as of March 31, 2014. Partially offsetting these favorable factors is the fact that, similar to other insurance brokers that Fitch rates, MMC faces contingent risks, including reputational risk and as an occasional target of litigation and regulatory actions that can have a significant financial impact. RATING SENSITIVITIES Longer-term rating triggers that could result in a rating 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 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 assigns the following rating with a Stable Outlook: Marsh & McLennan Companies, Inc. --$600 million 3.50% senior debt due 2024 'BBB+'. Fitch has affirmed the following ratings with a Stable Outlook: Marsh & McLennan Companies, Inc. --Long-term IDR at 'BBB+'; --Short-term IDR at 'F2'; --Commercial paper at 'F2'; --$320 million 5.375% senior debt due 2014 at 'BBB+'; --$230 million 5.75% senior debt due 2015 at 'BBB+'; --$250 million 2.30% senior debt due 2017 at 'BBB+'; --$250 million 2.55% senior debt due 2018 'BBB+'; --$400 million 9.25% senior debt due 2019 at 'BBB+'; --$500 million 4.80% senior notes due 2021 at 'BBB+'; --$250 million 4.05% senior debt due 2023 at 'BBB+'; --$300 million 5.875% senior debt due 2033 at 'BBB+'. Contact: Primary Analyst Greg Dickerson Director +1-212-908-0220 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004 Secondary Analyst Gretchen Roetzer Director +1-312-606-2327 Committee Chairperson Donald Thorpe Senior Director +1-312-606-2353 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS OTHER THAN THROUGH THE MEDIUM OF ITS PUBLIC DISCLOSURE. Applicable Criteria and Related Research: --'U.S. Insurance Broker Industry Sector Credit Factors' (May 4, 2012); --'Corporate Rating Methodology' (Aug. 5, 2013). Applicable Criteria and Related Research: U.S. Insurance Broker Industry Sector Credit Factors here Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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