Arthur J. Gallagher Ramps Up Employee Benefit Business
Arthur J. Gallagher & Co. (AJG) has announced the buyout of Everett James, Inc. The move marks an effort by the company to ramp up its employee benefits business. Notably, the terms of the transaction were not disclosed.
Since the news came in at the end trading session, investors are expected to respond positively to this acquisition in the next session, leading to a rise in the stock price.
CT-based Everett James, Inc. specializes in group health and welfare consulting for private and public entity organizations, with emphasis on planning, design, implementation, cost containment and plan administration services. Hence, acquisition of this company will help Arthur J. Gallagher strengthen its presence in Connecticut with enhanced employee benefit solutions and brokerage services.
The insurance broker has been consistently boosting its employee benefits business. Its latest acquisitions, namely the Baker Tilly's Employee Benefits Solutions Business, U.S.-based Foundation Strategies Inc, UT-based Insurance Point, LLC and CO-based Denman Consulting Services reflect its endeavors in this respect.
Arthur J. Gallagher is well known for pursuing acquisitions that help to expand its business globally. The latest acquisition marks the ninth one in the current quarter. In the previous quarter, it had made 17 acquisitions with annualized revenue totaling $497.1 million. The acquisition spree is expected to continue in the coming quarters.
Notably, the company’s liquidity cushions its acquisitions with cash balance up 3.3 times from 2013 end and retained earnings of $596.9 million (up 8.7% from 2013-end).
Riding on its strong fundamentals, Arthur J. Gallagher has been witnessing upward estimate revisions. For 2014, the Zacks Consensus Estimate moved north by 2% to $2.51 per share as 5 of 10 estimates were raised while for 2015, it increased 1.7% to $2.93 as 6 out of 10 estimates moved higher. The long-term growth of Arthur J. Gallagher is targeted at 14.8%.
Arthur J. Gallagher’s compelling inorganic growth and strong focus to strenthen its employee benefit busines will likely prompt analysts to raise their estimates, resulting in a rank upgrade on the stock. At present, Arthur J. Gallagher carries a Zacks Rank #2 (Hold).
Insurance brokers are now increasingly opting for inorganic growth to boost prospects. Notably, Aon plc’s (AON) global risk management business, Aon Risk Solutions acquired a Lima-Peru-based risk and insurance solutions provider, Grana y Asociados last month. In June, Brown & Brown Inc. (BRO) acquired select assets of Gaston & Associates., Marsh & McLennan Companies Inc.’s (MMC) leading insurance brokerage wing, Marsh Inc. also announced the purchase of Montreal-based commercial insurance brokerage, Kocisko Insurance Brokers Inc. earlier this month.
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