Marsh & McLennan (MMC) To Launch Specialty Business

Marsh & McLennan Companies, Inc.'s (NYSE:MMC) unit Marsh recently announced the launch of a new specialty business within Marsh called Marsh-JLT Specialty. This will be a combination of the specialty teams of Marsh and Jardine Lloyd Thompson Group plc (JLT). The new segment would be effective upon the closure of Jardine Lloyd Thompson Group’s buyout. The deal, subject to closing conditions, is expected to be completed during the spring of 2019. Marsh & McLennan would fund this transaction through cash in hand as well as proceeds from debt financing.

With this new specialty, the combined firm will be able to cater to clients, who require specialized products as well as services. Dominic Burke, the current CEO of JLT Group, will also become the Chairman of Marsh-JLT Specialty. While Lucy Clarke, CEO of JLT Specialty, will become the President of this Specialty.

Currently operating across 40 countries, JLT provides risk and insurance broking advice to energy, mining, healthcare, construction, marine and aerospace sectors as well as in financial lines, political risk and trade credit. The to-be-acquired company’s impressive profile boasting constant organic growth and geographic diversification will surely be able to fortify Marsh & McLennan’s portfolio. The acquirer expects to create a convincing value proposition to clients and shareholders with this consolidation.

The purchase is further likely to strengthen the company’s initiative to emerge as a distinguished global firm in areas of risk, people and strategies. Annual cost synergies of around $250 million are expected to be realized from this transaction over the next three years. This apart, the deal is estimated to be immediately accretive to the acquiring company’s adjusted cash EPS and also produce a double-digit internal rate of return.

The company’s efforts to expand in higher growth and higher margin sectors have been strongly evident from its string of earlier acquisitions as well.

In August 2018, the company announced that it will acquire the investment consulting, alternatives consulting and wealth management operations of Pavilion Financial Corporation to complement its current investment consulting, alternatives and wealth management offerings. Moreover, the parent company's unit Mercer has also signed an agreement to purchase Summit Strategies Group for brace its growth profile and enhancing the service portfolio.

Shares of this Zacks Rank #3 (Hold) company have gained 4%, underperforming its industry’s growth of 8.3%.

Stocks to Consider

Investors interested in the insurance sector might consider a few better-ranked stocks like Willis Towers Watson Public Limited Company (NASDAQ:WLTW) , eHealth, Inc. (NASDAQ:EHTH) and Cigna Corporation (NYSE:CI) .

Willis Towers works as an advisory, broking and solutions company worldwide. The company carries a Zacks Rank #2 (Buy) and managed to deliver positive results in the trailing four reported quarters, the average beat being 7.13%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

eHealth offers private online health insurance exchange services in the United States and China. It holds a Zacks Rank of 2 and came up with an average three-quarter positive surprise of 7.29%.

Cigna provides insurance and related products and services in the United States and internationally. It is a Zacks #1 Ranked stock and pulled off an average four-quarter beat of 13.46%.

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