1 Stock to Help Insure Your Portfolio Profits

It's a rough world out there; luckily for you, there are plenty of insurers to help you get back on your feet when the world throws you for a loop. One company in particular won't just insure you -- it could also help your portfolio profit: Marsh & McLennan (NYSE: MMC  ) .

M&M: Not just a great candy
Marsh & McLennan is the second largest insurance broker in the world. The company has two main segments" Risk and Insurance Services, and Consulting. The R&I division is the largest division at the company, consisting of Marsh, the insurance brokerage, and Guy Carpenter, the reinsurance division. This past quarter the R&I division brought in $1.7 billion in revenue, a 5% increase and 56% of the company's Q2 revenue. The division also saw operating income grow 14% year over year.

Meanwhile, the consulting division did nearly as well. In Q2 the segment increased revenue to $1.3 billion, a 4% increase year over year. Operating income also rose drastically, increasing 14% to $176 million, the highest quarterly consulting earnings ever.

All of this great performance from its divisions created an excellent quarter for Marsh & McLennan. The company increased revenue 3% to $3 billion, with operating income rising 11%. This translated to income of $339 million and an adjusted EPS of $0.61 (up from $0.50 year over year).

A lot of this financial strength is due to overall growth seen at M&M, which Marsh Inc. CEO Peter Zaffino attributes to strong client retention, rollover from new business (which has grown 10% year over year), and fewer economic headwinds than in 2011. If these trends continue, M&M will continue to have an excellent year.

M&M: Not just a great rapper
Perhaps most impressive is M&M's performance overseas; the company's international operations saw its Latin America segment increase revenue 14%, while the Asia-Pacific region rose 10%, and the Europe/Middle East/Asia sector grew 5%. The company has seen strong growth abroad in all segments of its business, perhaps thanks in part to business growth in emerging markets.

As great as this emerging-market growth may be, though, investors should be aware that a lot of Marsh & McLennan's revenue comes from Europe. The company makes about $12 billion in annual revenue, and one-third of that comes from the Old World. That's a lot of exposure for a company that reinsures businesses in a part of the world as volatile as Europe is now. 

On the other hand, Marsh & McLennan looks reasonable compared with its peers:

Company

P/E

Dividend Yield

Payout Ratio

Net Profit Margin

Debt to Equity

Marsh & McLennan 18.4 2.7% 48% 9% 47%
Aon (NYSE: AON  ) 18.0 1.2% 21% 9% 53%
Willis Group Holdings (NYSE: WSH  ) 15.0 3% 45% 13% 92%
Industry Average 21.4 2.3% 43% 7% 50%

Source: Motley Fool CAPS.

It doesn't yield quite as high a dividend as Willis Group Holdings, but M & M's debt-to-equity ratio is drastically healthier. The company has a reasonable valuation, and with earnings as strong as this quarter's, Marsh & McLennan looks like an intriguing stock.

If you're looking for some other great stock ideas, check out our special free report, aptly titled The Motley Fool's Top Stock for 2012.

Fool contributor Mark Reeth doesn't own any of the stocks mentioned in the story above, but he could definitely use some better insurance. Follow all of Mark's adventures on Twitter, @ChristmasReeth. The Motley Fool owns shares of Aon, and our newsletter services have recommended buying shares of Aon and Accenture. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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