The outlook "reflects a belief that brokers have largely put the issues from recent regulatory investigations behind them," said Greg Dickerson, an associate director. "Although near-term profitability may not reach peak levels last seen in 2002 and 2003, Fitch expects the industry's cash flow to be more than sufficient to support debt-servicing requirements."

Fundamentally, Fitch said the industry in general--and specifically the larger broker firms that are in Fitch's rating universe--"continues to possess qualities that are consistent with investment grade ratings."

Fitch said while it is unlikely that industry profitability and operating margins will return to levels reported in the early 2000s, it believes broker operating performance will improve significantly in 2006, as the litigation settlements and restructuring charges of 2005 that followed investigations by attorneys general in several states have greatly diminished.

"Also, brokers are gradually adapting to the impact of margin contraction due to the elimination of contingent commissions and a softening rate environment," Fitch said.

Fitch said through the first nine months of 2006, financial results indicated that theindustry had stabilized following the pain experienced in 2004 and 2005.

The eight publicly-traded brokers tracked by Fitch Ratings have seen consolidated net income improve by an average of 127 percent, year-to-date, largely due to lower settlement and restructuring expenses, Fitch said.

Average organic and reported revenue growth will also improve in 2006, aided by significant rate hikes in catastrophe-exposed business lines that have offset ratedeclines in other areas, it said.

The revision in Willis' rating reflects, among other positives, its ability to outperform those of its closest competitors for several years. "In Fitch's view, Willis' pure broker platform allows management to focus on its core insurance brokerage business, unlike its larger competitors, which have recently been distracted by struggles in ancillary businesses," it said.

Fitch said its negative outlook for Marsh stems from the "material decline" in its franchise value as a result of allegations of bid-rigging and market steering within its insurance brokerage operations, which came close on the heels of reputation issues suffered in its Putnam investment unit due to improper trading practices.

"While these negative points are largely built into MMC's existing ratings, Fitch believes that a negative outlook is still warranted "due to uncertainty regarding the longer term effect" of these issues on the parent company's operating franchise and profitability.

"In Fitch's view, Marsh has not fully demonstrated its ability to retain its client base or manage the impact of business model changes on profitability," its report said. "At the same time, Putnam has struggled to stem the tide of net withdrawals from its invested asset base," the analysis added.