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Expanding its employee benefit coverage, Marsh & McLennan Companies Inc.’s (MMC - Analyst Report) Marsh & McLennan Agency LLC (MMA) announced the acquisition of South Carolina-based employee-benefit oriented services provider Rosenfeld Einstein. However, the terms and financials details of the agreement are not divulged. MMA is a subsidiary of MMC’s leading insurance brokerage wing – Marsh Inc.
Accordingly, Rosenfeld Einstein will function as a part of Rutherfoord, a wing of MMA, to extend the capabilities and resources of property-casualty (P&C) and employee benefits in Southeast and mid-Atlantic regions. Armed with 55 employees and annual revenues worth $9 million, Rosenfeld Einstein has been in operations since 1933 and enjoys an authentic standing for its prompt specialty services.
On the other hand, the latest acquisition is another attempt by Marsh & McLennan to consolidate its manpower resources in order to expand its clientele. The company also aims to stretch its business dimensions and gain competitive edge by providing a broad suite of products that suit the customers’ needs and evade complex risks.
Increasing Horizons Inorganically
MMA is pursuing consistent expansion through inorganic growth. Earlier this year, MMA acquired Progressive Benefit Solutions,Security Insuranceand Eidson Insurance, 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 Rosenfeld Einstein, MMA has acquired about 21 firms since November 2009, which include 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 $380 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 results in the first half of 2012 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 - Snapshot Report).
Currently, Marsh & McLennan carries a long-term Neutral recommendation and a Zacks Rank #3, which translates into a short-term Hold rating.