U.S. Markets closed

Marsh & McLennan Buys VISICOR

Zacks Equity Research

Marsh & McLennan Companies Inc.’s (MMC) Marsh & McLennan Agency LLC (MMA.V) announced the acquisition of Texas-based employee benefits brokerage and consulting firm – VISICOR.

However, the value and terms and conditions of the buyout were not disclosed. MMA is a subsidiary of Marsh & McLennan’s leading insurance brokerage wing – Marsh Inc.

VISICOR generates annual revenues of $1.5 million by offering compliance, consulting, financial and administrative services pertaining to employee benefits of both the public and private companies in Texas.

We believe the acquisition will enable VISICOR to retain its existing business model and enhance its technical expertise by tapping the vast resources of Marsh & McLennan.

For Marsh & McLennan, the deal will help to expand its employee benefits coverage by consolidating individual outperforming agencies across the Southwest of the US. This will boost its operating synergies and network.

Outlook Healthy

Moreover, Marsh & McLennan’s positive financial results, improved margins, healthy balance sheet, incremental shareholder returns and adequate liquidity underscore the absence of any significant risk from the company’s financial leverage. This is also evident from the annualized debt-to-EBITDA that improved to 2.2x at Mar 2014-end from 3.1x at 2011-end. During this period, the company’s leverage ratio was also maintained around 3x.

Despite the high number of acquisitions, Marsh & McLennan’s leverage is lower than its close competitor, Aon Plc (AON), as validated by Moody’s Investor Service of Moody’s Corp. (MCO). Consequently, the ratings agency lifted Marsh & McLennan’s senior debt rating to “Baa1” from “Baa2” last month.

While increased international dependence exposes the company to currency volatility, Marsh & McLennan has a history of outperforming peers banking on its size, extensive 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 earnings in the future as well.

Other Stocks to Consider

Marsh & McLennan carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Aon and Erie Indemnity Co. (ERIE), both of which bear a Zacks Rank #2 (Buy).

Read the Full Research Report on MCO
Read the Full Research Report on MMC
Read the Full Research Report on AON
Read the Full Research Report on ERIE

Zacks Investment Research