S&P Takes MMC off CreditWatch; Affirms ‘BBB’ Rating, Negative Outlook

March 25, 2005

Standard & Poor’s Rating Services announced that it has affirmed its “BBB” counterparty credit and senior unsecured debt ratings and ‘A-2’ commercial paper ratings on Marsh & McLennan Cos. (MMC) and removed the ratings from CreditWatch where they had been placed Oct. 15, 2004. The rating outlook is negative.

“The ratings were removed from CreditWatch because of recent favorable developments,” said S&P. These included: “the nationwide structuring of settlement with the New York State attorney general and Superintendent of the New York State Insurance; fourth-quarter 2004 results being consistent with our expectations; and our view that management, in addition to being appropriately focused on employee and client retention, is proactively addressing industry change through the implementation of a new business model.”

The rating agency added that “the reduction in the common stock dividend and its positive effect on MMC’s compliance with the covenants on the $1.3 billion term loan facility and $1.7 billion revolving credit facility also support the rating action.”

However, S&P noted: “There remains the potential for significant adverse developments and resultant effect on MMC’s ability to comply with the covenants, particularly in 2005. These uncertainties include significant concerns surrounding employee and client retention, material execution risk due to the adopting of the current infrastructure to the new business model, and the potential for ongoing regulatory investigations to hamper MMC’s competitive position.

“The current ratings, in addition to reflecting the diversity of operating earnings, incorporate Standard & Poor’s expectation that although pretax income might continue to be affected by nonrecurring events, MMC’s operating profile will enable it to remain in compliance with the covenant terms of the credit facilities.

“The ratings also reflect diminished cashflow and earnings resulting from a modest strain (up to 5 percent brokerage revenue) resulting from client loss, in addition to the adverse revenue impact from the termination of contingent commissions.”

S&P indicated that it expects the “positive financial effects resulting from the implementation of the new business model will be readily apparent by the latter half of 2005.”

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