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Why Should You Hold Marsh & McLennan (MMC) in Your Portfolio?
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Marsh & McLennan Companies, Inc.’s (MMC - Free Report) solid portfolio, growth strategy and an improving top line helped make its place in investor's good books.
The insurance brokerage player is well-poised for progress, evident from its VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Now let’s see what makes this insurance broker a leading player in the field.
MMC's operating performance has favored its results over the past many years. Its diverse product offerings, client retention and a broad geographical presence contributed to this upside. Its revenues have been increasing since 2010 (except in 2015). The trend has continued in 2021 as well with revenues improving 10% on an underlying basis from the prior-year level, courtesy of strong Risk & Insurances Services and Consulting segments. A gradually recovering U.S. economy and constant rate increases across the commercial property and casualty (P&C) insurance marketplace are anticipated to drive revenues in the future.
Marsh & McLennan has maintained a consistent cash flow generation for several years. Its disciplined capital management through share buybacks and dividend payments instilled investors’ trust in the stock. MMC even increased dividend 15% last July, reflecting its 12th consecutive year of dividend hike.
Acquisitions have always contributed to MMC’s growth. Multiple purchases have been made over the past many years that helped MMC penetrate new geographical areas and expand within the current ones. In 2021, Marsh & McLennan spent $1.1 billion on buyouts. During 2020 and 2021, the Risk and Insurance Services segment completed seven and eight acquisitions, respectively. Last year, the Consulting segment made one acquisition. In fact, the insurance brokerage space holds ample opportunities for players to expand through their M&A activity.
For instance, Arthur J. Gallagher & Co. (AJG - Free Report) , Aon plc (AON - Free Report) and Brown & Brown, Inc. (BRO - Free Report) also boast impressive growth stories via buyouts and alliances.
AJG completed and integrated 600 acquisitions from Jan 1, 2002 through Dec 31, 2020, most of which were within its brokerage segment. AJG completed 38 mergers with more than $1 billion of estimated annualized revenues and more than 110 basis points of adjusted EBITDAC margin expansion in 2021.
BRO has acquired above 500 insurance intermediary operations in more than two decades. In 2021, BRO completed 19 acquisitions with annual revenues of approximately $132 million.
Acquisitions and partnerships form one of the main growth strategies at Aon and it has sealed many acquisitions over the past few years. AON’s acquisitions mainly aim to expand its health and benefits business, flood insurance solutions, and risk and insurance solutions operations.
Coming back to MMC, it will exit its Russia business, which might effect its margins to some extent. Its elevated expense level also bothers.
Marsh & McLennan’s trailing 12-month return on equity (ROE) reinforces its growth potential. MMC’s 30.9% ROE betters its industry average of 29%, reflecting its efficiency in utilizing its shareholders’ funds.
The Zacks Consensus Estimate for 2022 earnings is pegged at $6.68, indicating growth of 8.3% from the year-ago reported figure.
The same for revenues stands at $21.19 billion, implying a 6.9% rise from the prior-year reported number.
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Why Should You Hold Marsh & McLennan (MMC) in Your Portfolio?
Marsh & McLennan Companies, Inc.’s (MMC - Free Report) solid portfolio, growth strategy and an improving top line helped make its place in investor's good books.
The insurance brokerage player is well-poised for progress, evident from its VGM Score of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Now let’s see what makes this insurance broker a leading player in the field.
MMC's operating performance has favored its results over the past many years. Its diverse product offerings, client retention and a broad geographical presence contributed to this upside. Its revenues have been increasing since 2010 (except in 2015). The trend has continued in 2021 as well with revenues improving 10% on an underlying basis from the prior-year level, courtesy of strong Risk & Insurances Services and Consulting segments. A gradually recovering U.S. economy and constant rate increases across the commercial property and casualty (P&C) insurance marketplace are anticipated to drive revenues in the future.
Marsh & McLennan has maintained a consistent cash flow generation for several years. Its disciplined capital management through share buybacks and dividend payments instilled investors’ trust in the stock. MMC even increased dividend 15% last July, reflecting its 12th consecutive year of dividend hike.
Acquisitions have always contributed to MMC’s growth. Multiple purchases have been made over the past many years that helped MMC penetrate new geographical areas and expand within the current ones. In 2021, Marsh & McLennan spent $1.1 billion on buyouts. During 2020 and 2021, the Risk and Insurance Services segment completed seven and eight acquisitions, respectively. Last year, the Consulting segment made one acquisition. In fact, the insurance brokerage space holds ample opportunities for players to expand through their M&A activity.
For instance, Arthur J. Gallagher & Co. (AJG - Free Report) , Aon plc (AON - Free Report) and Brown & Brown, Inc. (BRO - Free Report) also boast impressive growth stories via buyouts and alliances.
AJG completed and integrated 600 acquisitions from Jan 1, 2002 through Dec 31, 2020, most of which were within its brokerage segment. AJG completed 38 mergers with more than $1 billion of estimated annualized revenues and more than 110 basis points of adjusted EBITDAC margin expansion in 2021.
BRO has acquired above 500 insurance intermediary operations in more than two decades. In 2021, BRO completed 19 acquisitions with annual revenues of approximately $132 million.
Acquisitions and partnerships form one of the main growth strategies at Aon and it has sealed many acquisitions over the past few years. AON’s acquisitions mainly aim to expand its health and benefits business, flood insurance solutions, and risk and insurance solutions operations.
Coming back to MMC, it will exit its Russia business, which might effect its margins to some extent. Its elevated expense level also bothers.
Shares of this insurance brokerage player have gained 25.8% in a year's time, outperforming its industry's growth of 12.4%. MMC currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Further Upside Left?
Marsh & McLennan’s trailing 12-month return on equity (ROE) reinforces its growth potential. MMC’s 30.9% ROE betters its industry average of 29%, reflecting its efficiency in utilizing its shareholders’ funds.
The Zacks Consensus Estimate for 2022 earnings is pegged at $6.68, indicating growth of 8.3% from the year-ago reported figure.
The same for revenues stands at $21.19 billion, implying a 6.9% rise from the prior-year reported number.