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AJG Adds Belmont International

Zacks Equity Research

In its sustained effort to ramp up its inorganic growth story, Arthur J. Gallagher & Co. (AJG) acquired Belmont International for an undisclosed amount. Though the stock tumbled 0.8% the following day, it again gained 0.3% on Sep 20. We believe the fluctuations were likely due to broader market fundamentals. Year to date, the stock has gained nearly 28.4%.

Based in Kent, England and founded in 1988, Belmont offers retail insurance and employee benefit products and services in the U.K., with heightened focus on coverage for the passenger transportation, real estate and renewable energy industries.

Addition of Belmont to Arthur J. Gallagher & Co.’s portfolio will leverage the latter’s foothold in southeastern U.K. and also enhance its product portfolio.

Earlier this month, Arthur J. Gallagher & Co. announced the acquisition of Eau Claire, Wis.-based R. W. Scobie, Inc. to augment its wholesale network.

Arthur J. Gallagher & Co. has been consistently following the inorganic path to ramp up its growth profile. Till date, in the third quarter, Arthur J. Gallagher & Co. has announced eight acquisitions. In the last reported quarter, the company closed five acquisitions with annualized revenues totaling $35.9 million. The company’s strong financial position continues to support its robust acquisition strategy.

Among other insurance brokers, in August, Mercer, consulting wing of Marsh & McLennan Companies Inc. (MMC) announced its intention to purchase the pension wind-up operations of PricewaterhouseCoopers (PwC) in Canada in a bid to expand its operations in the country. Brown & Brown Inc. (BRO) closed its merger with Beecher Carlson Holdings, Inc. in July.

Arthur J. Gallagher & Co. presently carries a Zacks Rank #3 (Hold). The company has been witnessing rising earnings estimates. We expect the momentum to continue given its impressive inorganic growth story.

In the insurance space, property and casualty insurer AmTrust Financial Services, Inc. (AFSI) also has a strong history of acquisitions. Recently, AmTrust Financial inked a deal to buy the Insco Dico Group (Insco Dico) for about $85 million in an effort to strengthen its foothold in the domestic surety insurance market.

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