Brokers like Marsh & McLennan (MMC) (“MarshMac”) are toll collectors and gatekeepers when it comes to the global insurance marketplace, helping (and working with) clients to assess their insurance needs, and then find the right coverage and best prices for that risk. It’s a good business in ordinary times, with clients often overwhelmed by the choices in the market, not to mention the fine print, and not really having a good perspective on the market. In times of rising social inflation and hard insurance markets, it’s a great business.
Although MarshMac shares have modestly lagged the S&P 500 over the past year, I can’t say it’s particularly cheap. I do expect a period of above-average earnings in the insurance business, helped by a hard market, social inflation, and competitive disruptions, and I can see a path to better results from the consulting businesses, but with the shares already trading at a forward P/E about 4.5 pts higher than the long-term average (and about 2.5 pts for the EV/EBITDA multiple), it’s hard not to say that the good news is in the shares.
Read the full article at Seeking Alpha:
Marsh & McLennan Offers Great Toll Collector Access To Insurance, But Not Cheap Access
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