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Arthur J. Gallagher (AJG) Adds Evans Agency to Its Portfolio

Arthur J. Gallagher & Co. AJG recently closed The Evans Agency buyout. The acquisition was announced last month. The acquisition will consolidate the acquirer’s presence in Western New York.

Williamsville, NY-based The Evans Agency is the wholly-owned subsidiary of Evans Bancorp, Inc., which is a commercial property/casualty insurance broker with a public entity and scholastic expertise. The company also offers personal lines and employee benefits services to its clients across the Western New York region. The addition of Evans Agency will not only strengthen the acquirer’s presence in that region but also enhance AJG's capabilities to serve clients better.

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. The recent acquisition marks the 14th buyout quarter to date. AJG made 17 buyouts in the fourth quarter of 2022 with estimated annualized revenues acquired of $141.3 million.

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 #3 (Hold) 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 28.7% year to date, outperforming the industry’s 14.8% 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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Zacks Investment Research

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Acquisition by Another Industry Player

Marsh & McLennan Companies, Inc.’s MMC business, Mercer, recently agreed to buy the outsourced chief investment officer (OCIO) business of Vanguard, a leading investment management firm. The move is expected to boost Mercer’s position in the OCIO space.

The acquisition underscores Marsh & McLennan's strategic inorganic growth approach, exemplified by various purchases across its operating units. These acquisitions have facilitated entry into new regions, expansion in existing ones, diversification into new businesses and the development of new segments. The prudent acquisitions position the company for sustained long-term growth.

Stocks to Consider

Some better-ranked stocks from the Brokerage Insurance space are ErieIndemnity. ERIE and Brown & Brown BRO.

Erie Indemnity delivered a four-quarter average earnings surprise of 10.03%. ERIE has gained 21.2% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ERIE’s 2023 and 2024 earnings per share (EPS) is pegged at $8.53 and $9.85, indicating a year-over-year increase of 49.4% and 15.5%, respectively.

Brown & Brown delivered a four-quarter average earnings surprise of 1.41%. Shares of BRO have gained 29.8% year to date. It presently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for BRO’s 2023 and 2024 EPS is pegged at $2.76 and $3.02, indicating a year-over-year increase of 21.1% and 9.4%, respectively.

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