Fitch Upgrades Marsh Ratings - Analyst Blog
08 2월 2013 - 12:00AM
Zacks
Fitch Ratings upgraded the
previously assigned Issuer Default Rating (IDR) and senior
unsecured debt rating to “BBB+” from “BBB” of Marsh &
McLennan Companies, Inc. (MMC). The rating carries a
stable outlook.
The ratings upgrade came on back of
the company’s consistent improvement in its operating performance
and robust credit metrics since the second half of 2010. The EBIT
operating margin, debt-to-EBITDA ratio and EBITDA-to interest
coverage ratios of Marsh & McLennan have been strong enough to
be accounted for in the ratings upgrade.
Marsh & McLennan, which occupies an important position in the
insurance brokerage and consulting market, has a strong financial
flexibility which is reflected in the ratings. Moreover, settling
down the periodic restructuring charges as well as regulatory and
legal issues that had been adversely affecting the company
financials for several years are also reflected in the ratings.
Fitch expects the gradual improvement in the commercial pricing and
macroeconomic environment as well as Marsh & McLennan’s
manageable pension contributions to augment its operating
performance in the upcoming periods. However, potential goodwill
risk and occasional litigation distractions are some of the factors
that might dwarf the positives.
Fitch stated that the ratings or rating outlook might be revised
upward owing to sustained consolidated EBIT operating margins of
15% or more along with debt-to-EBITDA ratios consistently below 1.3
and EBITDA-to-interest ratios maintained in excess of 12.0x. On the
other hand, a downgrade in rating or rating outlook could result
from deterioration in the company's EBITDA-to-interest coverage
ratio below 8.0x and the debt-to-EBITDA ratio above 2.0x. Material
charges from litigation or regulatory issues might also invite a
downward revision in the ratings.
Rating affirmations or upgrades
from credit rating agencies play an important part in retaining
investor confidence in the stock as well as maintaining the
creditworthiness in the market. We believe that the company’s
present score with the credit rating agencies will help it write
more business going forward.
Last September, Standard &
Poor's Ratings Services (S&P) reiterated the 'BBB-'
counterparty credit rating, on Willis Group Holding
PLC (WSH), another insurance broker. The rating was
downgraded to stable from positive based on the rating agency’s
expectation that Willis will be unable to meet its standards.
Marsh & McLennan currently
carries a Zacks Rank #3 (Hold). Among others from the industry,
Ehealth Inc. (EHTH) carries a favorable Zacks Rank
#1 (Strong Buy) whereas Brown & Brown Inc.
(BRO) carries a Zacks Rank # 2 (Buy) and are worth noting.
BROWN & BROWN (BRO): Free Stock Analysis Report
EHEALTH INC (EHTH): Free Stock Analysis Report
MARSH &MCLENNAN (MMC): Free Stock Analysis Report
WILLIS GP HLDGS (WSH): Free Stock Analysis Report
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