Arthur J. Gallagher (AJG) Boosts Ireland Presence With Buyout
Arthur J. Gallagher & Co. AJG recently acquired Keaney Insurance Brokers Ltd. The terms of the transaction have not been revealed yet.
Dublin, Ireland-based Keaney Insurance was formed in 1993. It specializes in commercial insurance and risk management services. Being a commercial insurance broker, Keaney supports businesses across Ireland with insurance and risk management solutions.
The addition of Keaney will boost the acquirer’s international capabilities in Ireland with their market expertise.
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. The recent acquisition marks the seventh acquisition in the fourth quarter of 2023.
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 ranged 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. For 2024, AJG currently estimates about $3.5 billion of capacity to fund future M&A using only free cash and incremental borrowings.
This Zacks Rank #2 (Buy) insurance broker’s long-term growth strategies should help it deliver organic revenue improvement and pursue strategic mergers and acquisitions. The company 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 26.2% in the past year, outperforming the industry’s 15.7% 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, another player 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, which 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.
Other Stocks to Consider
Some other top-ranked stocks from the Brokerage Insurance space are Ryan Specialty Holdings, Inc. RYAN and Aon plc AON, each carrying a Zacks Rank #2 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 lost 2.1%.
The Zacks Consensus Estimate for Ryan Specialty’s 2023 and 2024 earnings per share is pegged at $1.39 and $1.70, indicating a year-over-year increase of 20.8% and 21.9%, 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 1.41%. In the past year, AON has gained 13.5%.
The Zacks Consensus Estimate for Aon’s 2023 and 2024 earnings per share is pegged at $14.35 and $16.25, indicating a year-over-year increase of 7.1% and 13.2%, respectively.
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