In Fitch's view, Mr. Cherkasky did a creditable job guiding MMC through the turmoil following the New York Attorney General's civil suit and allegations of bid rigging. Although Fitch believes that MMC's insurance brokerage business (Marsh) has experienced a material decline in franchise value, the company has remained viable with a strong competitive position in the insurance brokerage marketplace. However, Fitch believes that the decision to replace Mr. Cherkasky is an acknowledgement of Marsh's disappointing operating performance over the past two years, especially when compared to its two primary competitors, Aon Corp. (Aon) and Willis Group Holdings Limited (Willis).
Although Fitch's Rating Outlook for MMC, Aon, and Willis is Stable, MMC's ratings are the most vulnerable of these three companies, primarily because results in MMC's insurance brokerage operations continue to lag those of its closest peers.
Fitch's ratings for MMC reflect the company's favorable competitive position as one of the world's largest financial services firms, with major operations in insurance brokerage, consulting and risk consulting and technology. Fitch considers the company's diverse operations to be a key strength.
Additionally, Fitch recognizes that MMC's debt-to-capital and interest coverage ratios have migrated closer to historical levels after deteriorating in 2004 and 2005. Fitch expects that MMC will maintain its financial leverage and interest coverage ratios near current levels, which are sufficient to support MMC's existing ratings as long as the company's operating performance does not further deteriorate.
Finally, Fitch anticipates that settlements of any outstanding litigation brought by policyholders or shareholders related to previous allegations of bid-rigging or market steering will be at modest costs.