NU Online News Service, July 13, 2:02 p.m. EDT
Moody’s says it expects Marsh & McLennan Cos. Inc. to remain the preeminent player in its primary business of insurance broking and consulting, as moves to improve business performance gain traction.
“We expect MMC’s credit metrics to benefit from restructuring steps and debt reduction achieved over the past few years,” says Bruce Ballentine, Moody’s lead analyst for Marsh & McLennan, in a statement. “The stable rating outlook reflects our view that the company will gradually improve its operating margins and remain a market leader in insurance brokerage and consulting.”
The company, like other insurance brokers, still faces challenges from “slow economic recovery, soft pricing in the commercial property and casualty insurance market, and potential errors and omissions,” Moody’s says.
While the company has a strong insurance market presence globally, its strengths are tempered by “relatively weak, but improving, operating margins” and volatile net profits.
The rating service made the observation in rating a $500 million note offering of 10-year senior unsecured notes by Marsh & McLennan.
Moody’s assigned a rating of “Baa2” to the offering.
Marsh & McLennan says the note would be used to repurchase approximately $600 million outstanding notes due on 2014 and 2015. The closing of the offer is expected on July 15.
Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC are managing the offering.
Marsh & McLennan suffered through the brokerage steering and kick-back scandal back in 2005 when executives were allegedly caught steering insurance contracts to certain insurance carriers in exchange for lucrative contingent commissions.
The company paid an $850 million dollar settlement at that time and was barred from accepting any contingent commissions until recently. As a result of the loss of commissions, the firm was forced to eliminate hundreds of jobs and deal with significant loss in revenues.
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