Fitch Ratings has assigned various ratings to Marsh & McLennan Companies, Inc. (MMC), including a ‘A+’ senior debt rating and an ‘F1’ commercial paper rating. The Rating Outlook is Stable.
The ratings reflect MMC’s strong business profile that includes leading market shares in multiple operations, strong earnings margins, good long-term growth trends and solid financial flexibility. The ratings further point out the company’s excellent cash flow, favorable long-term track record and apparently successful integration of two major acquisitions in the late 1990s. Also, while all businesses are financial service related, Fitch does not believe that earnings are highly correlated and thus promoting greater earnings stability.
Also considered in the ratings are the company’s large cash demands, including fixed obligations, rents, shareholder dividends, and potential stock repurchases. While the company’s earnings are expected to experience some volatility due to the influence of external factors on revenue including financial and insurance market factors and competitive challenges, Fitch believes long-term earnings performance will remain very strong.
The company’s capitalization maintains some modest risks, with debt-to-total capital in the 40 percent range over recent periods and intangible assets slightly larger than reported shareholders equity. Management has publicly stated that intangible assets are very stable.
However, Fitch believes credit quality is better supported by liquid, tangible assets that have the ability to generate near-term cash if needed. Given the company’s frequent use of short-term debt in recent years, Fitch believes the company’s overall balance sheet and liquidity profile support the current ratings.