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Marsh & McLennan (MMC) Unit Acquires InSource Insurance

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Marsh & McLennan Companies, Inc.’s (MMC - Free Report) unit Marsh McLennan Agency or MMA acquired the market-leading independent agency InSource Insurance Group LLC in Texas. MMA is a subsidiary of Marsh, which is a leader in insurance brokering, providing risk management, insurance and reinsurance broking, and insurance program management services across public and private entities. However, the terms of the deal were kept under wraps.

Formed in 1986, InSource Insurance provides business insurance, employee health and benefits, private client and surety services to various industries, such as the oil and gas, construction, manufacturing and transportation industries.

Rationale Behind the Deal

InSource and MMA share the same commitment to providing the best client service and industry specialization. MMA will be able to leverage InSource’s knowhow in the oil and gas industry and boost its capabilities with this latest addition. It looks forward to expanding its reach and widening its client offerings.

Shares of MMC have gained 40.5% in a year's time, outperforming its industry's growth of 24%. Growing revenues, hike in investment income, capital-deployment strategy and diverse product offerings should help the stock continue its rally going forward.

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Inorganic Growth Story

Acquisitions form one of the core growth strategies at this currently Zacks Rank #3 (Hold) player. The leading insurance broker made numerous purchases within its different operating units that enabled it to enter new geographies, expand within the existing locations, foray into new businesses, develop new segments and specialize within its current businesses. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its MMA unit continuously acquires units to boost its portfolio. For instance, last month, this arm of Marsh announced the buyout of Pelnik Insurance, a leading independent agency in North Carolina. MMA also bought one of the biggest independent agencies called Vaaler Insurance, Inc. in North Dakota.

The year 2020 marked a record phase for MMA with regard to acquired revenues since its establishment in 2009. MMA completed eight transactions last year, fetching combined revenues of around $235 million. Marsh is steadily contributing to growth of the Risk and Insurance Services segment.

In the first nine months of 2021, revenues from this business segment amounted to $9 billion, up 15.8% from the year-ago figure in the comparable period, on an underlying basis.

There has been a host of transaction activities in the insurance brokerage space of late. Given the insurance industry’s adequate capital level, players like Brown and Brown Inc. (BRO - Free Report) , Arthur J. Gallagher & Co. (AJG - Free Report) and Chubb Limited (CB - Free Report) are pursuing strategic mergers and acquisitions.

Last month, Brown & Brown acquired Heacock Insurance. The addition of Heacock Insurance will boost BRO’s presence in central Florida. BRO intends to make consistent investments in boosting organic growth and margin expansion. Its solid earnings allowed it to expand its capabilities while a slew of buyouts extended its geographic footprint.

Recently, Arthur J. Gallagher & Co. acquired Real Estate Insurance Solutions to consolidate its real-estate portfolio. AJG boasts an impressive inorganic story. AJG’s merger and acquisition pipeline is quite strong, with about $400 million worth revenues associated with nearly 50 term sheets, either agreed upon or being prepared.

Chubb signed a definitive agreement to take over the life and non-life insurance companies of Cigna to expand its presence in the Asia-Pacific region. CB has always considered acquisitions an effective strategy for growth and global expansion. Acquisitions provide CB with a competitive edge in terms of scale, efficiencies and the balance-sheet size, which will unlock considerable value in the future.

Brown & Brown, Arthur J. Gallagher & Co. and Chubb gained 42.8%, 40.2% and 13.7%, respectively, in the same space.