NEW YORK, June 14 (Reuters) - Standard & Poor's on Monday changed its outlook on Marsh & McLennan's to negative, from stable, citing risks to the company's business and reputation from a legal settlement its subsidiary Mercer made with an Alaskan pension plan.
A negative outlook indicates the company, the second-largest global insurance broker by assets, may be likely to be cut from BBB-minus, the lowest investment grade, into junk territory over the coming one-to-two years.
Consulting business Mercer agreed to pay $500 million to Alaska to settle a lawsuit over the state's unfunded employee pension plans, Mercer and Alaska's attorney general, Daniel Sullivan, said on Friday.
The state had sought as much as $2.8 billion in a lawsuit, first filed in December 2007, that accused Mercer of making several errors in calculating employee pension and health-care obligations. For details, see
'The magnitude of the settlement exceeded our expectations and, in our opinion, raises concerns regarding any potential adverse impact on Mercer's reputation and competitive position,' S&P said in a statement.
The settlement also follows changes at the company 'which, in our view, have contributed to marginal operating performance and have diminished MMC's earnings quality,' S&P said.
These include restructuring the company's operating units, goodwill write-downs at its Kroll business and other divestitures or strategic changes, the rating agency said.
Marsh & McLennan in February posted better-than-expected results for the fourth quarter helped by improving overseas operations.
'However, given the recent settlement at Mercer, we believe that legacy issues are still affecting Marsh & McLennan's operating results,' S&P said. 'As a result, we are concerned about Marsh & McLennan's ability to sustain its earnings improvements.'
(Reporting by Karen Brettell; Editing by Leslie Adler) Keywords: MARSHANDMCLENNAN RATING/SANDP (karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
A negative outlook indicates the company, the second-largest global insurance broker by assets, may be likely to be cut from BBB-minus, the lowest investment grade, into junk territory over the coming one-to-two years.
Consulting business Mercer agreed to pay $500 million to Alaska to settle a lawsuit over the state's unfunded employee pension plans, Mercer and Alaska's attorney general, Daniel Sullivan, said on Friday.
The state had sought as much as $2.8 billion in a lawsuit, first filed in December 2007, that accused Mercer of making several errors in calculating employee pension and health-care obligations. For details, see
'The magnitude of the settlement exceeded our expectations and, in our opinion, raises concerns regarding any potential adverse impact on Mercer's reputation and competitive position,' S&P said in a statement.
The settlement also follows changes at the company 'which, in our view, have contributed to marginal operating performance and have diminished MMC's earnings quality,' S&P said.
These include restructuring the company's operating units, goodwill write-downs at its Kroll business and other divestitures or strategic changes, the rating agency said.
Marsh & McLennan in February posted better-than-expected results for the fourth quarter helped by improving overseas operations.
'However, given the recent settlement at Mercer, we believe that legacy issues are still affecting Marsh & McLennan's operating results,' S&P said. 'As a result, we are concerned about Marsh & McLennan's ability to sustain its earnings improvements.'
(Reporting by Karen Brettell; Editing by Leslie Adler) Keywords: MARSHANDMCLENNAN RATING/SANDP (karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.