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 Peru-based insurance advisor – Rehder y Asociados Group (Rehder).
The transaction is expected to culminate by the end of Jun 2013. The acquisition includes both the insurance operations of Rehder and the employee health benefits operations of Humanasalud. Other terms and financial consideration of the deal remain undisclosed.
Further, the acquisition complements Marsh & McLennan’s strategy of expansion into global emerging economies. Armed with annual revenue of over $30 million, Rehder’s excellent risk management capacities and superior market position in Peru will broaden Marsh & McLennan’s product offerings in South America, thereby laying down scope for enhanced growth for the company. The latest acquisition is yet another attempt by the company to enhance its manpower resources in order to expand its clientele.
Moreover, the acquisition will help Marsh & McLennan penetrate the Peru insurance market, wherein Rehder enjoys a strong client base as it has been covering about 17% of this market for over 8 years now. Through such acquisitions, Marsh has expanded its operations in over 100 countries globally.
Marsh & McLennan’s focus on boosting inorganic growth is well aligned with its emphasis on generating positive financial results and expanding margins. Moreover, a healthy balance-sheet and adequate liquidity eliminates any significant risk from the company’s financial leverage. This is because Marsh & McLennan keeps its capital requirements at low levels despite acquisitions.
While increased international dependence exposes the company to currency volatility, 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) , CBOE Holdings Inc. (CBOE - Analyst Report) and Montpelier Re . All these stocks carry a Zacks Rank #1 (Strong Buy).