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S&P Lifts Marsh & McLennan Rating on Refined Strategy, Lower Risks

Source: Dow Jones

Posted on 15 Oct 2012 by Neilson

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MarshStandard & Poor's Ratings Services raised its investment-grade rating on Marsh & McLennan Cos. by one notch, pointing to the insurance brokerage's efforts in refining its strategy and lowering its operational and financial risks.

S&P lifted Marsh & McLennan's rating to triple-B, two notches into investment grade, from triple-B-minus. The outlook is stable.

The ratings firm noted Marsh & McLennan has reported material improvement in its business and financial profiles in recent years. Credit analyst Julie Herman said the company has reduced its debt, streamlined operations, divested its underperforming Kroll unit and improved its operating strategy.

"We believe management's operational and strategic changes have been positive for the organization and are now translating into greater competitive sustainability and tangible performance improvements," Ms. Herman said.

Despite economic weakness in some of the company's markets, Marsh & McLennan has reported positive organic growth at each of its operating units for the past eight consecutive quarters. The company reported organic revenue growth of 6% in the first six months of 2012 and 5% for full-year 2011, supported by favorable new business and retention trends as well as insurance rate stabilization, S&P noted.

S&P added the company's bottom-line results have also improved in recent years, helped by a lack of material charges since the second quarter of 2010, improved operational efficiencies and revenue growth.

The company's insurance and consulting businesses have been a continued source of strength for Marsh & McLennan, as have a series of acquisitions that have given a boost to the firm's revenue. In August, Marsh & McLennan reported its second-quarter profit surged 17% on revenue gains in its consulting and risk and insurance divisions.

Last month, the company said Brian Duperreault will retire as chief executive and president at the end of the year, with Chief Operating Officer Daniel S. Glaser succeeding him.

Shares slipped by eight cents to $34.30 in recent trading. The stock is up 7.6% over the past three months.