US – Marsh McLennan Companies, the parent of pensions consulting firm Mercer, has had its senior debt rating downgraded by Fitch Ratings to ‘BBB-' – the latest fallout of an insurance bid-rigging probe.

Fitch said there was a fundamental change at the firm which means it will no longer be “a superb profit generator”.

“Fitch Ratings has downgraded the senior debt rating on Marsh & McLennan Companies to 'BBB-' from 'BBB',” Fitch said. All ratings remain on negative watch pending the resolution of suits filed by New York Attorney General Eliot Spitzer. Mercer is not part of the probe.

It said: “Regardless of the ultimate outcome of the suits, Fitch believes that Marsh will suffer a material decline in its franchise value as a result of the allegations, especially given recent reputation issues suffered in its Putnam mutual fund unit, tied to improper trading practices.”

It added that “significant uncertainties still exist as to the ultimate magnitude of outcomes from the Spitzer lawsuit and changes in the broker operating environment”.

Fitch has lowered Marsh's senior debt rating five notches and commercial paper rating once since Spitzer filed suit against the firm. The affair has already cost the job of MMC chief executive Jeffrey Greenberg.

“Fitch believes that there is a fundamental change in Marsh's operating profile in which the company will fade from a superb profit generator and that Marsh's pretax brokerage margins could drop from 24%-28% historically to as low as 12%-15% over the next 18 months.”

Yesterday IPE reported that MMC was facing a class action suit alleging staff have suffered in their retirement accounts amid the scandal.

Connecticut-based law firm Scott & Scott said it has filed the suit in the US District Court for the Southern District of New York “on behalf of participants and beneficiaries of the Marsh & McLennan Companies Stock Investment Plan”.