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Arthur J. Gallagher Acquires Serna to Boost Personal Lines

Zacks Equity Research

Arthur J. Gallagher & Co. AJG recently acquired Serna Insurance Agency in a bid to boost its personal lines of business. The transaction details were not revealed.

Founded in 2001 Humble, TX-based Serna Insurance Agency provides private client, personal lines and commercial insurance products and services. It boasts the largest independent private client and personal lines agencies in Texas. The company caters to clients across Texas and the surrounding states. Serna Insurance is a strategic fit as it will complement Arthur J. Gallagher’s personal lines of business. This marks the 11th buyout so far this quarter.

Arthur J. Gallagher has an impressive inorganic story having completed 542 mergers and acquisitions in a span of more than 17 years.  Its merger and acquisition pipeline is quite strong with about $400 million of revenues. Its strategic buyouts are supported by the company’s solid capital position, which, in turn, is driven by operational excellence. The company targets about $1.5 billion of mergers and acquisitions with free cash and debt.

Arthur J. Gallagher is one of the top five global brokers, having a presence in the United States, Australia, Bermuda, Canada, the Caribbean, New Zealand and the United Kingdom.  The company’s continued inorganic and organic growth efforts have been driving its revenues that have more than doubled in the last six years.

Shares of this Zacks Rank #3 (Hold) insurance broker have rallied 19.3% in a year’s time, underperforming the industry’s increase of 27.1%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive share price higher.

There have been a number of acquisitions in the insurance industry lately, given the significant capital available. Last month, Brown & Brown, Inc.’s BRO unit Brown & Brown Insurance Agency of Virginia, Inc. acquired WBR Insurance Agency, LLC, Wilson Insurance Agency, Inc., Bell Insurance Agency Corporation and Robertson Insurance Agency, Co.

Stocks to Consider

Some better-ranked insurance stock are eHealth EHTH and Hallmark Financial Services HALL both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth operates through two segments and provides services like private health insurance exchange in the United States and China to families, individuals and small businesses. The company came up with an average four-quarter positive surprise of 167.16%.

Hallmark Financial provides its services to individuals and businesses in the United States through its subsidiaries. It markets, distributes and services property and casualty products. Its average four-quarter positive surprise is 97.50%.

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