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Arthur J. Gallagher (AJG) Boosts Marine Insurance Via Buyouts

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Zacks Equity Research
·3 min read
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Arthur J. Gallagher & Co. AJG recently acquired North Star Insurance Services and North Star Marine Insurance Services. The terms of the transaction have not been revealed yet.

Seattle-based North Star Insurance Services, which was founded in 2001, serves the marine industry. It provides insurance coverage for hull, machinery, marine liabilities and cargo for commercial fishing, tugs and barges, shipyards and ocean-going cargo vessels. It caters to clients across the United States. Fairhaven, MA-based North Star Marine Insurance Services was founded in 2014 to cater to increasing demand in that region. The addition of North Star will thus help Arthur J. Gallagher boost its marine insurance business.

This marks the company’s fifth buyout in the ongoing quarter. In the first nine months of 2020, the company completed 17 mergers, representing about $151.2 million of annualized revenues. Its merger and acquisition pipeline is quite strong with about $350 million revenues associated with nearly 40 term sheets either agreed upon or being prepared.

A solid capital position supports Arthur J. Gallagher in its growth initiatives. The company targets about $1.5-$1.6 billion of mergers and acquisitions with free cash and debt.

This Zacks Rank #3 (Hold) insurance broker remains focused on long-term growth strategies for delivering organic revenue improvement, and pursuing strategic mergers and acquisitions. It is also focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future.

Shares of Arthur J. Gallagher have gained 22.6% year to date against the industry’s 3.2% increase. Efforts to ramp up its growth profile and capital position should continue to drive share price higher.

There have been a host of acquisitions in the insurance space of late, given significant capital availability. Kemper Corporation KMPR has agreed to acquire American Access Casualty Company and related captive insurance agency, Newins Insurance Agency Holdings, LLC, and its subsidiaries to strengthen the Specialty Auto segment. Brown & Brown announced that its subsidiary has bought CoverHound and its wholly-owned unit, CyberPolicy. Arch Capital Group ACGL has agreed to acquire Watford Holdings WTRE.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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