Marsh, Hartford Take Ratings Hit on Scandal
By Steve Tuckey
NU Online News Service, Nov. 29, 4:27 p.m. EDT? Marsh & McLennan Companies brokerage and Hartford Insurance Group received negative ratings actions last week in connection with the broker fee scandal.
Standard & Poor's lowered its counterparty credit and senior debt ratings on Marsh and McLennan Cos. Inc. to "BBB/A-2″ from "BBB plus /A- 2."
S&P analyst Steven Ader the company will continue to endure diminished cash flows to due to the ending of the brokers' Market Service Agreements through 2006.
"We also believe that the net effect of the expense reductions will take longer than we had anticipated," Mr. Ader said.
But S&P thinks the company has adequate resources to manage any settlements reached as a result of legal and regulatory activity arising from allegations of bid-rigging and price-fixing
The New York-based ratings agency also last week revised its outlook on the Hartford Insurance Group property/casualty subsidiaries to negative from stable.
Though not named as a defendant, Hartford PC was one of four insurers identified in the complaint filed by N.Y. Attorney General Eliot Spitzer against MMC in October, which accused the company of bid rigging and price fixing in exchange for payoffs from insurers.
"These allegations have already led to several class action suits against Hartford and additional investigations by numerous state regulators," said S&P analyst Robert Hafner.
Mr. Hafner said the company faces not only monetary but reputation damage "sufficient to erode its strong competitive advantage."
In the past several week S&P has also taken negative ratings action on American International Group's holding company and the Bermuda-based Ace International holding and operating companies.
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