Zacks_Analysts' Blog : Marsh & McLennan Buys Seitlin Insurance - Analyst Blog

Expanding its employee benefits coverage, yesterday, Marsh & McLennan Companies Inc.’s (MMC) Marsh & McLennan Agency LLC (MMA) announced the acquisition of a leading South Florida-based Seitlin Insurance. However, the terms and financials of the deal remain concealed. MMA is a subsidiary of MMC’s leading insurance brokerage wing– Marsh Inc.

With $24 million in annual revenue and about 119 sales personnel, Seitlin has been offering property and casualty insurance and employee benefits, since 1945, to middle market companies across a diverse range of industries. The acquisition is also crucial for new business production and client retention.

Acquisitions Inducing Growth

MMA has been consistently pursuing expansion along the inorganic route. Earlier this month, MMA acquired the employee benefits division of Kaeding, Ernst & Co. and Gallagher Associates Inc.

Following the acquisition of Seitlin Insurance, MMA acquired more than 14 firms since November 2009, which include Prescott Pailet Benefits LP (PPB), Insurance Alliance, The NIA Group, Haake Cos., Thomas Rutherfoord Inc., Bostonian Group and Kinloch Boston.

The acquisitions are a part of MMA’s long-term growth strategy to build a national platform that serves the property and casualty insurance and employee benefits needs of companies across the US.

Further, after the successful asset disposal of its redundant Kroll and Putnam units last year, the acquisitions bode well for the overall restructuring of Marsh & McLennan. The acquisition is also crucial for new business generation and client retention, which has been facing substantial declines due to the company’s antitrust litigation charges coupled with a soft pricing environment.

However, despite the acquisition-related costs, Marsh & McLennan came out fairly well from the first quarter of 2011, posting improved results on account of top-line growth in all lines of businesses and higher investment income. These were partially offset by increased operating and tax expenses.

While the company is able to concentrate on its core efficiencies, Marsh & McLennan’s unutilized $1.0 billion revolving credit facility along with expected tax benefits in the upcoming quarters shall provide a cushion to the company’s liquidity, thereby eliminating any significant risk from the company’s financial leverage.

Overall, as a leading global broker, Marsh & McLennan has a history of outperforming its peers due to its size, diverse product offering, global presence and technical expertise. Despite sluggish organic growth, the company is still a dominant player in its industry, behind the leader -- Aon Corp. (AON).