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Marsh & McLennan Companies, Inc. (MMC), Willis Group Holdings PLC (WSH), Aon PLC (AON): Investing in Insurance Advisory Can Help Your Portfolio Improve

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According to MarketLine, the global insurance sector is expected to grow at a CAGR of 7.8% from 2010-2015, which will drive the market value to $59.4 billion by 2015 compared to $40.8 billion in 2010. With the recovering U.S. economy, the growth of insurance brokers is expected to remain stable, reporting mid-single digit revenue growth, and improved margins, this year. Let’s see how these insurance advisory companies strategize to sustain in the changing economic conditions to generate higher revenue.

Expanding through acquisitions

Marsh & McLennan Companies, Inc.The energy sector is an important one. Hence, Marsh & McLennan Companies, Inc. (NYSE:MMC)‘s subsidiary, Oliver Wyman, is focused on improving its consulting and advisory services in order to better solve business challenges faced by its clients from the utilities, oil, and gas sector. It recently acquired Corven, a U.K.-based management consultancy that primarily serves the energy sector.

Corven provides advisory and consulting services to the world’s largest natural resources and energy companies like Shell, National Grid, Centrica, BP, etc. With Corven’s expertise, Oliver will be able to help its clients emerge as leaders in their market chosen. It expects to generate revenue of $358 million in the second quarter, up from $321 million in the previous quarter.

Through acquisitions, Marsh & McLennan Companies, Inc. (NYSE:MMC) has expanded its business in more than 100 countries. Such acquisitions help the company generate positive financial results. To continue enhancing its earnings, the company’s subsidiary, Marsh, recently acquired a leading Peru-based insurance advisor Rehder y Asociados Group, which generates annual revenue of over $30 million and has a strong client base covering 17% of Peru’s market for more than eight years. The acquisition will place Marsh in a leading position in the best performing economies of South America. Through such acquisitions, Marsh & McLennan Companies, Inc. (NYSE:MMC) expects to generate EPS of $2.42 this year, and $2.65 in 2014.

North America rebound continues

Willis Group Holdings PLC (NYSE:WSH)’s North America segment expects to see better revenue in the coming years due to three main factors. First, housing demand and home prices are increasing as the economic condition stabilizes in the U.S. Second, the company’s human capital practices provide health, welfare, and human resources consulting and brokerage services. Last, the company’s construction division specializes in insurance brokerage, provides risk management, and surety bonding services to the construction industry.

With the expertise in human capital practices and construction services, it will attract more clients and drive revenue. Therefore, Willis Group Holdings PLC (NYSE:WSH)’ North America segment is expected to generate revenue of $1.37 billion in this year, up from $1.31 billion in 2012, and $1.43 billion in 2014.

Willis Group Holdings PLC (NYSE:WSH) announced a cost reduction plan in the last quarter. It plans to reduce salaries and benefits by eliminating head count by 207 this year. Additionally, the company’s subsidiary acquired two major IT staffing service providers in the first quarter to enhance its client base and IT services. The IT improvements will also lead to lesser operational expenses. With this, the company projects total savings of approximately $20 million in the remaining six months.

Additionally, it is expected to save around $25 million to $30 million annually starting next year. The company estimates EPS generation of $2.73 by the end of this year, up from $2.59 in 2012. The cost saving initiative and slightly higher revenue from North America are driving the company’s EPS.

Benefits from healthcare reform

The Affordable Care Act will take effect by 2014. Consequently, it is expected that more than 100,000 U.S. employees of small and mid-sized businesses will sign up for the new health insurance through a new corporate health exchange. The corporate health exchange is an insurance marketplace where several insurance companies compete to offer employees a wide range of plans that suits them, and their families.

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