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Why Should You Add Marsh & McLennan (MMC) in Your Portfolio?

Marsh & McLennan Companies, Inc.’s MMC expanding portfolio, inorganic growth strategies and rising revenues make it a good investment choice.

Over the past 30 days, MMC has witnessed its 2022 earnings estimates move 0.4% north.

MMC 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 company in the field.

MMC is well-poised for growth on the back of its strategic initiatives. Its Marsh and Mercer business segments constantly take up initiatives to bolster their portfolio. In 2019, Marsh & McLennan bought JLT to enhance its portfolio.

The year 2020 marked a record period for Marsh McLennan Agency’s (MMA) acquired revenues since its establishment in 2009. As a case in point, MMC completed eight transactions during the same time frame, fetching combined revenues of around $235 million. In the first nine months of 2021, MMC spent $401 million on buyouts. The Risk and Insurance Services segment completed three acquisitions in the first nine months of 2021.

Recently, its Mercer segment agreed to divest Associations business to Association Member Benefits Advisors or AMBA, a national membership and marketing insurance agency. This move is expected to streamline MMC's portfolio and increase efficiency. Proceeds from the deal are expected to help MMC reduce its debt burden as well as solidify its balance sheet.

MMC's operating performance has favored its results over the past many years. Its diverse product offerings, client retention and broad geographical presence contributed to this upside. Its revenues have been increasing consistently since 2010 (except in 2015). The trend has continued in the first nine months of 2021 as well, with revenues improving 14.6% on an underlying basis from the prior-year comparable period’s level, courtesy of strong Risk & Insurances Services and Consulting segments.

Marsh & McLennan has maintained consistent cash flow generation for several years. Its disciplined capital management through share buybacks and dividend payments cemented investors’ trust in the stock.

Shares of this insurance brokerage player have gained 44.1% in a year's time, outperforming its industry's growth of 22.5%.

Image Source: Zacks Investment Research

MMC currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further Upside Left?

Marsh & McLennan’s trailing 12-month return on equity (ROE) reinforces its growth potential. MMC’s 31.6% ROE betters its industry average of 28.9%, reflecting its efficiency in utilizing its shareholders’ funds.

The Zacks Consensus Estimate for 2022 earnings is pegged at $6.74, up 9.5% from the year-ago reported figure.

The same for revenues stands at $21 billion, implying a 7.1% rise from the prior-year reported number.

We think that the insurance broker is well-poised for growth on the back of its inorganic growth story and other initiatives.

Other Stocks to Consider

Other top-ranked stocks in the insurance space include Brown & Brown, Inc.  BRO, Ryan Specialty Group Holdings Inc. RYAN and Willis Towers Watson Public Limited Company WTW, each currently carrying a Zacks Rank of 2.

Brown & Brown markets and sells insurance products and services, primarily in the United States, London, Bermuda and the Cayman Islands. BRO’s earnings managed to beat estimates in all its trailing four quarters, the average being 18.3%.

Ryan Specialty Group Holdings is a service provider of specialty products and solutions for insurance brokers, agents and carriers. RYAN came up with a trailing four-quarter earnings surprise of 41.2%, on average.

Willis Towers Watson Public Limited Company is an advisory, broking and solutions company. WTW managed to come up with a trailing four-quarter surprise of 15.3%, on average.

Shares of BRO, RYAN and WTW have gained 44.8%, 31.2% and 10.9% each in a year’s time.

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