Marsh & McLennan Unit Sustains Its Acquisition Spree

Marsh & McLennan Companies, Inc.'s MMC Marsh McLennan Agency ("MMA"), a division of MMC's Marsh business, recently inked a definitive deal to purchase the Illinois-based leading full-service insurance broker, The Horton Group, Inc. The transaction is expected to be completed in the third quarter of 2024, but the terms of the deal have been kept under wraps.

The addition of Horton is expected to enhance the risk management capabilities of MMA and after the finalization of the acquisition, the acquiree's employees will be part of MMA and will continue operating from their current offices.

Horton seems to be a prudent pick by MMA since it has been providing property and casualty insurance, employee benefits consultation, and personal lines coverage to businesses and individuals in Indiana, Illinois, Wisconsin, Minnesota and Florida for more than five decades.

Improved risk management strategies resulting from the recent acquisition are likely to fetch more clients to MMA and subsequently, drive the performance of the Risk and Insurance Services segment. The segment usually accounts for a major chunk of Marsh & McLennan's overall top line and the unit's revenues advanced 9.4% year over year in the first quarter.

The sub-unit Marsh, through MMA, remains quite active throughout the year with respect to the acquisition spree and therefore, requires a special mention. MMA delivers business insurance, employee health and benefits, retirement and wealth management, and private client insurance solutions to individuals and mid-market organizations.

MMA bought Minnesota-based AmeriStar Agency and New Jersey-based Hudson Shore Group in July 2024. In June, it purchased Mississippi-based Fisher Brown Bottrell Insurance, Inc. to strengthen its risk management services suite and boost its Southeast presence. MMA also acquired Texas-based Perkins Insurance Agencies in May to fortify its footprint in the West Texas market.

The various units within the Risk and Insurance Services and Consulting segments of Marsh & McLennan leverage acquisitions to enhance their product offerings, enter new markets, expand within current locations, venture into new business areas, and specialize within existing ones. In the first quarter, MMC spent $301 million on acquisitions.

Another business of MMC, Oliver Wyman, closed the buyout of the commodity trading advisory firm, Veritas Total Solutions, in July 2024, well within the targeted timeline. The Mercer business entered into a deal to acquire long-term savings specialist, Cardano, which operates mainly in the United Kingdom and the Netherlands. The deal is likely to be completed by the end of this year.  

Shares of Marsh & McLennan have gained 13.3% in the past year compared with the industry's 8.5% growth. MMC currently carries a Zacks Rank #3 (Hold).

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Stocks to Consider

Some better-ranked stocks in the insurance space are Palomar Holdings, Inc., Brown & Brown, Inc. BRO and RLI Corp. RLI. While Palomar currently sports a Zacks Rank #1 (Strong Buy), Brown & Brown and RLI carry a Zacks Rank #2 (Buy) each.

Palomar's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.10%. The Zacks Consensus Estimate for PLMR's 2024 earnings implies 26% year-over-year growth while the same for revenues indicates an improvement of 34.2%. The consensus mark for PLMR's earnings has moved 4% north in the past 60 days.

The bottom line of Brown & Brown outpaced earnings estimates in each of the last four quarters, the average surprise being 11.90%. The Zacks Consensus Estimate for BRO's 2024 earnings and revenues indicates a rise of 28.5% and 9.1%, respectively, from the prior-year reported figures. The consensus mark for BRO's earnings has moved 2.8% north in the past 60 days.  

RLI's earnings surpassed estimates in three of the trailing four quarters and missed the mark once, the average surprise being 132.39%. The Zacks Consensus Estimate for RLI's 2024 earnings implies 18.4% year-over-year growth, while the same for revenues indicates an improvement of 15.6%. The consensus mark for RLI's earnings has moved 0.3% north in the past 60 days.

Shares of Palomar, Brown & Brown and RLI have gained 44.5%, 29.9% and 1.2%, respectively, in the past year.

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