Marsh & McLennan's Marsh to Buy a Chunk of Semusa - Analyst Blog

Moving ahead with its inorganic growth strategy, Marsh & McLennan Companies Inc.'s MMC leading insurance brokerage wing – Marsh Inc. – announced its intention to acquire a major stake in Panama-based Seguros Morrice y Urrutia SA (Semusa). While the value and terms of the deal remain undisclosed, the transaction is scheduled to culminate by Sep 2014.

Armed with more than $2.8 million of assets and a clientele of over 75,000, Semusa is a leading insurance brokerage service firm with a strong foothold in Central America and the Caribbean. Expansion in these regions also backed Marsh's decision to acquire Franco & Acra Tecniseguros in the Dominican Republic in Jun 2013.

The intention to buy a majority stake in Semusa stems from its time-honored alliance with Marsh, whereby the former continues to be Marsh's franchise broker since 1999. Post-acquisition, Semusa will operate under Marsh's brand name.

Gaining Scale from Acquisitions

The deal complements Marsh & McLennan's strategy of expansion into potentially strong markets through mergers and acquisitions. Moreover, Panama is among the rapidly growing economies and lays ample growth opportunities for Marsh & McLennan. Additionally, Semusa will bring a strong management team and about 196 professionals with a comprehensive understanding of the local market. This will be an added advantage for Marsh.

The largest insurance brokerage player by market value, Marsh & McLennan has been gaining a strong competitive edge withthe spree of acquisitions executed over the past years. About 45 acquisitions in the insurance brokerage space since Nov 2009 have enhanced Marsh's scale and size of business, thereby substantially contributing to its top line.

Though increased international dependence exposes the company to currency volatility, Marsh & McLennan has a history of outperforming peers given its size, extensive product offering, global presence and technical expertise.

Marsh & McLennan carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Aon Plc AON, Platinum Underwriters Holdings Ltd. PTP and Erie Indemnity Co. ERIE, all of which have a Zacks Rank #2 (Buy).

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