Yesterday,
Marsh & McLennan Companies Inc.
's (
MMC
) Marsh & McLennan Agency LLC (MMA) announced the acquisition
of a leading Wisconsin-based Security Insurance Services Inc. The
acquisition expands MMA's, and eventually MMC's, insurance and
employee benefits coverage. However, the terms and financials
details of the deal remain concealed. MMA is a subsidiary of MMC's
leading insurance brokerage wing - Marsh Inc.
Armed with annual revenues worth $10 million, Security Insurance
targets the clients in the Midwest by offering an array of
property-casualty (P&C) and employee benefits services and
products. The company also offers specialty services within the
senior health care, construction and manufacturing industries. Post
the acquisition, Security Insurance will be integrated with RJF
Agencies of upper Midwest, which was acquired by MMA in January
2011. The latest acquisition is another attempt by Marsh &
McLennan to consolidate its manpower resources in order to expand
its clientele.
Acquisitions Inducing Growth
Moreover, MMA is pursuing consistent expansion through inorganic
growth. Last month, MMA acquired Progressive Benefit Solutions,
which was preceded by the acquisitions of the employee benefits
division of Kaeding, Seitlin Insurance, Ernst & Co. and
Gallagher Associates Inc. in November last year. Following the
acquisition of Security Insurance, MMA has acquired about 19 firms
since November 2009, which includes Prescott Pailet Benefits LP
(PPB), Insurance Alliance, The NIA Group, Haake Cos., Thomas
Rutherfoord Inc., Bostonian Group and Kinloch Boston. These
acquisitions have also enabled MMA to generate about $365 million
in annualized revenue. The acquisitions are a part of MMA's
long-term growth strategy to build a national platform that serves
the P&C insurance and employee benefits needs of the companies
across the US.
Further, after the successful asset disposition of its redundant
Kroll and Putnam units in 2010, the acquisitions bode well for the
overall restructuring of Marsh & McLennan. The acquisition is
also crucial for new business generation and client retention,
which faces substantial declines due to the company's antitrust
litigation charges coupled with a soft-pricing environment.
However, despite the acquisition related costs, Marsh &
McLennan posted impressive first quarter 2012 results on account of
top-line growth in all lines of businesses and higher investment
income. Even lower operating and tax expenses supported margin
growth. In addition, a stable outlook affirmation from the ratings
agencies boosts the optimism about Marsh & McLennan's
credibility and operating leverage.
While the company is able to concentrate on its core
efficiencies, Marsh & McLennan's unutilized $1.0 billion
revolving credit facility along with expected tax benefits in the
upcoming quarters shall provide cushion to the company's liquidity,
thus eliminating any significant risk from the company's financial
leverage.
Overall, as a leading global broker, Marsh & McLennan has a
history of outperforming its peers banking on its size, diverse
product offering, global presence and technical expertise. Despite
the sluggish organic growth, the company is still a dominant player
in its industry, quite next to the leading
Aon Corp.
(
AON
).
Currently, Marsh & McLennan carries a long-term Neutral
recommendation and a Zacks #4 Rank, which translates into a
short-term Sell rating.
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MARSH &MCLENNAN (MMC): Free Stock Analysis
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