Arthur J. Gallagher (AJG) Acquires Hughes Insurance Agency

Arthur J. Gallagher & Co. AJG recently acquired Hughes Insurance Agency, Inc. The buyout will help AJG consolidate its presence in the Northeastern United States.

Queensbury, NY-based Hughes Insurance Agency, Inc. specializes in offering life & health, personal and commercial insurance to individuals and businesses. It serves clients across the Northeastern United States. The addition of Hughes will not only consolidate the acquirer’s presence in that region but also enhance capabilities and offer growth opportunities.

Arthur J. Gallagher has an impressive inorganic story with buyouts in the Brokerage and Risk Management segments. This insurance broker acquired 37 entities in the first nine months of 2023 that contributed about $475.3 million to estimated annualized revenues. Arthur J. Gallagher is growing through mergers and acquisitions, most of which are within its Brokerage segment.

AJG has a solid merger and acquisition pipeline with about 45 term sheets either agreed upon or being prepared, representing more than $450 million of annualized revenues. Revenue growth rates generally range from 5% to 20% for 2023 acquisitions.

A solid capital position supports this Zacks Rank #2 (Buy) insurance broker in its growth initiatives. It remains focused on continuing its tuck-in mergers and acquisitions. AJG continues to expect M&A capacity upward of $3 billion through the end of 2023 and another $3.5 billion in 2024 without using any equity.

Arthur J. Gallagher’s long-term growth strategies should help it deliver organic revenue improvement and pursue strategic mergers and acquisitions. AJG is focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future.

Shares of Arthur J. Gallagher have gained 32% year to date, outperforming the industry’s 16.4% increase. Solid performance of the Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment should continue to drive share price higher.

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Acquisition by Another Industry Player

Given the insurance industry’s adequate capital level, Brown & Brown, Inc. BRO closed the acquisition of all the assets of Pacific Underwriters, boosting its capabilities in two different specialized niches and expanding the National Programs segment’s abilities and footprint in the Pacific Northwest.

These strategic buyouts help Brown & Brown increase commissions and fees, which, in turn, drive revenues. BRO’s impressive growth is driven by organic and inorganic means across all segments. Solid earnings have allowed the company to expand its capabilities, with the buyouts extending its geographic footprint.

Other Stocks to Consider

Some other top-ranked stocks from the Brokerage Insurance space are Marsh & McLennan Companies, Inc. MMC and Aon plc AON. Each stock presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Marsh & McLennan delivered a four-quarter average earnings surprise of 6.45%. MMC has gained 16.8% in a year.

The Zacks Consensus Estimate for Marsh & McLennan’s 2023 and 2024 earnings per share (EPS) is pegged at $7.93 and $8.67, indicating a year-over-year increase of 15.7% and 9.3%, respectively.

Aon delivered a four-quarter average earnings surprise of 1.41%. Shares of AON have gained 7.1% in a year.

The Zacks Consensus Estimate for Aon’s 2023 and 2024 EPS is pegged at $14.36 and $16.27, indicating a year-over-year increase of 7.2% and 13.3%, respectively.

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