Arthur J. Gallagher (AJG) Adds Clements Worldwide to Portfolio
Arthur J. Gallagher & Co. AJG recently acquired Clements Worldwide. The terms of the transaction have not been revealed yet.
Washington, D.C.-based Clements is an international insurance broker providing products and services for expats, diplomats and military personnel, as well as commercial solutions for nonprofits, contractors, embassies and schools.
The addition of Clements will boost the acquirer’s international capabilities with their specialist market expertise. The deal will also provide significant cross-selling opportunities for AJG.
Arthur J. Gallagher has an impressive inorganic story with buyouts in the Brokerage and Risk Management segments. This insurance broker acquired 25 entities in the first half of 2023 that contributed about $418 million to estimated annualized revenues and 13 more quarters to date.
AJG has a solid merger and acquisition pipeline with about 55 term sheets either agreed upon or being prepared, representing more than $700 million of annualized revenues. Revenue growth rates generally range from 5% to 20% for 2023 acquisitions.
A solid capital position supports the insurer in its growth initiatives and it thus 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 billion in 2024 without using any equity.
This Zacks Rank #3 (Hold) insurance broker’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.
Price Performance
Shares of Arthur J. Gallagher have gained 32.6% in the past year, outperforming the industry’s 19.7% increase. The 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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Another Acquisition in the Same Space
Given the insurance industry’s adequate capital level, players like Brown & Brown, Inc. BRO continuously make strategic acquisitions to expand globally, add capabilities and boost operations. BRO recently closed the acquisition of Kentro Capital Limited, boosting Brown & Brown’s presence in parts of England and will add specialty capabilities.
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. Its solid earnings have allowed the company to expand its capabilities, with the buyouts extending its geographic footprint.
Stocks to Consider
Some better-ranked stocks from the Brokerage Insurance space are Ryan Specialty Holdings, Inc. RYAN and Aon plc AON, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ryan Specialty has a decent track record of beating earnings estimates in two of the last four quarters, meeting once and missing the other one, the average being 2.37%. In the past year, RYAN has gained 8%.
The Zacks Consensus Estimate for Ryan Specialty’s 2023 and 2024 earnings per share is pegged at $1.39 and $1.68, indicating a year-over-year increase of 20.8% and 21.2%, respectively.
Aon has a decent track record of beating earnings estimates in two of the last four quarters while missing the other two, the average being 0.52%. In the past year, AON has surged 16.6%.
The Zacks Consensus Estimate for Aon’s 2023 and 2024 earnings per share is pegged at $14.27 and $16.13, indicating a year-over-year increase of 6.5% and 13.09%, respectively.
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