Marsh & McLennan Companies, Inc. (MMC): A Bull Case Theory

Core Thesis - Marsh & McLennan Companies, Inc. (MMC) is viewed positively due to its asset-light business model, strong client relationships, and long-term growth potential despite recent concerns about moderating insurance premiums [1][5]. Company Overview - MMC operates primarily in the insurance brokerage industry, earning commissions from premiums without assuming underwriting risk, with approximately 75% of its revenue coming from this core brokerage business [2]. - The remaining 25% of revenue is generated from its consulting arm, which does not have the same defensive advantages as the brokerage segment [2]. Market Dynamics - Recent investor concerns focus on the potential slowdown in commission growth due to moderating insurance premiums after years of rapid increases; however, insurance pricing is cyclical, and long-term premium increases are expected as the cost of risk rises globally [3]. - This cyclical nature of insurance pricing supports the long-term earnings potential of MMC [3]. Financial Metrics - MMC currently offers a free cash flow yield of over 5%, with projected earnings growth of approximately 7% CAGR driven by pricing, volume growth, and reinvestment returns [3]. - Valuation multiples for MMC remain below historical averages, with an EV/EBIT of 16 compared to a 10-year mean of around 18, indicating that the market may not fully recognize the stability and growth potential of the business [4]. Investment Opportunity - MMC is characterized as a highly profitable, asset-light business with resilient long-term growth prospects and an undervalued stock, potentially delivering above-average returns of 12% to 15% CAGR over the long term [4].