S&P Lowers MMC Credit Rating

Standard & Poor's Ratings Services lowered two ratings on New York-based Marsh & McLennan Companies, saying the company's insurance brokerage subsidiary Marsh has to improve earnings before the rating service can consider upgrading it again.

Yesterday, S&P said the counterparty credit rating on MMC would be lowered to "triple-B-minus" from "triple-B" and also lowered its short-term rating on MMC to "A-3" from "A-2." At the same time, S&P removed the ratings from credit watch with negative implications and added that the outlook is stable.

In a statement Steven Ader, S&P credit analyst, said the rating action reflected the many challenges MMC's Marsh faces over the next two years, exemplified in disappointing third quarter earnings.

"Marsh posted an operating loss resulting from the unsuccessful implementation of initiatives that, in addition to generating a substantial increase in operating expenses, posed a material distraction to servicing and selling to clients," said Mr. Ader.

Despite actions to improve results, S&P said it expects the effects of the changes will take time. The rating firm said it expects MMC to reduce its debt and improve earnings.

Regarding a price-fixing suit by Connecticut's attorney general against MMC's Guy Carpenter subsidiary, S&P said it does not believe the litigation will result in materially adverse information.

Mr. Ader said if MMC does improve results at Marsh, the outlook could be revised to positive. However, if it is unsuccessful, the outlook could be revised to negative.

Neither Moody's Investors Service nor Fitch Ratings have issued changes in their ratings for MMC.

In August Moody's changed the rating outlook on MMC from negative to stable because of the company's declining debt burden.

Fitch affirmed MMC's "triple-B" debt rating in June and revised the rating outlook from negative to stable.