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Marsh & McLennan (MMC) Arm Sells Associations Business to AMBA

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Marsh & McLennan Companies, Inc.’s MMC unit Mercer recently agreed to divest the Associations business to Association Member Benefits Advisors or AMBA, a national membership and marketing insurance agency.

The deal is expected to close in the second quarter of this year. The financial details of the transaction are yet to be disclosed. The move is expected to streamline MMC’s portfolio and increase efficiency. It will enable the company to focus on more profitable assets. The Associations business provides end-to-end services in insurance marketing, distribution, and administration to credit unions, retired teachers, educators as well as public employees in the domestic market.

Mercer, which belongs to the company’s Consulting segment, is a leading global provider of consulting, outsourcing and investment services. Mercer generated revenues of $1.3 billion in third-quarter 2021, climbing 7% year over year on an underlying basis. The latest divestment can further boost its profitability. Marsh & McLennan already boasts a trailing 12-month return on equity of 31.6%, above the industry average of 28.9%. This reflects the company’s effectiveness in utilizing shareholders’ money.

Proceeds from divestments might help Marsh & McLennan reduce debt burden and strengthen the balance sheet. As of Sep 30, 2021, the company had cash and cash equivalents of only $1.3 billion, way lower than the total debt load of $10.7 billion. MMC’s next debt maturity is due this month.

The move is beneficial for AMBA as it is expected to boost its geographic footprint in the United States. Also, it will enable AMBA to enhance product offering lists and increase memberships. Clients of the affinity-based membership and marketing insurance agency are likely to benefit from their access to a variety of coverages incorporating long-term and short-term care, emergency medical transportation, supplemental health, dental, vision, annuities, Medicare, and others.

Price Performance

Marsh & McLennan has jumped 46.6% in the past year compared with a 20% rise of the industry.

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Zacks Rank & Key Picks

The company currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the finance space include Brown & Brown, Inc. BRO, Ryan Specialty Group Holdings Inc. RYAN, and Willis Towers Watson Public Limited Company WTW, each currently holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brown & Brown markets and sells insurance products and services, primarily in the United States, London, Bermuda and the Cayman Islands. BRO’s bottom line for 2021 is expected to jump 29.3% year over year. Brown & Brown’s earnings managed to beat estimates in all the trailing four quarters, with the average being 18.3%.

Ryan Specialty Group Holdings is a service provider of specialty products and solutions for insurance brokers, agents, and carriers. The Zacks Consensus Estimate for RYAN’s 2021 earnings per share is pegged at $1.07. Ryan Specialty came up with a trailing four-quarter earnings surprise of 41.2%, on average.

Willis Towers Watson has advisory, broking, and solutions operations all over the world. WTW’s bottom line for 2021 is expected to jump 12% year over year. Willis Towers Watson beat earnings estimates in all the last four quarters, with the average being 15.3%.

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