Focusing on growth through acquisitions, Marsh & McLennan Companies Inc.’s (MMC - Analyst Report) leading insurance brokerage wing – Marsh Inc. – announced its intention to purchase a leading insurance advisor in the Dominican Republic – Franco & Acra Tecniseguros. While the terms of deal remain undisclosed, it is expected to culminate later this month.
The intention to buy Franco & Acra Tecniseguros stems from its longstanding alliance with Marsh, whereby the former continues to Marsh’s franchise broker since 1977. However, post acquisition Franco & Acra Tecniseguros will operate under Marsh’s brand name.
The deal complements Marsh & McLennan’s strategy of expansion into potentially strong markets through mergers and acquisitions. Moreover, Dominican Republic is among the leading economies of the Caribbean region and lays ample growth opportunities for Marsh & McLennan.
Additionally, Franco & Acra Tecnise will bring a strong management team with a comprehensive understanding of the local market. This will be an added advantage for Marsh.
Through such acquisitions, Marsh & McLennan has expanded its operations in over 100 countries globally. Last month, Marsh acquired Peru-based insurer – Rehder y Asociados Group. The latest acquisition substantiates the company’s efforts to enhance manpower resources in order to expand clientele.
Despite the acquisition-related costs, Marsh & McLennan posted impressive results in first quarter 2013 based on modest growth at Marsh, Guy Carpenter and Mercer; coupled with lower expenses that drove the top line and operating margin. Even the unutilized $1.0 billion revolving credit facility shall provide cushion to the company’s liquidity, thereby 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. We believe that the company has the ability to remain focused on this growth approach with a prudent management, thereby driving the earnings in the future as well.
While Marsh & McLennan carries a Zacks #3 Rank (Hold), other outperformers in the financial services industry include Validus Holdings Ltd. (VR - Snapshot Report), Platinum Underwriters Holdings Ltd. and Montpelier Re (MRH - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).