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Arthur J. Gallagher (AJG) Boosts Benefits Consulting With Buyout

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Arthur J. Gallagher & Co. AJG recently acquired Bradawn Insurance Services, Inc. The terms of the transaction have been kept under wraps.

Escondido, CA-based Bradawn Insurance Services, founded in 1983, is a full-service employee benefits solutions firm. It provides health and welfare consulting services to large, multi-state public, privately-held, nonprofit and for-profit employers and organizations.

With this latest addition to the portfolio, AJG will be able to strengthen its employee benefits consulting operations. The transaction will help the acquirer boost its account health and welfare capabilities as well as expand its footprint in Southern California.

Inorganic Growth Story

Arthur J. Gallagher boasts an impressive inorganic story. The recent buyout marks the 17th acquisition by the company quarter to date, compared with 10 buyouts in the fourth quarter of 2020 (with estimated annualized revenues of $100.2 million). It made five brokerage mergers during the third quarter of 2021, with estimated annualized revenues of $16 million. Arthur J. Gallagher’s merger and acquisition pipeline is quite strong with about $400 million revenues associated with nearly 50 term sheets either agreed upon or being prepared.

Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. Revenue growth rates have generally been 5-15% for 2021 acquisitions to date.

A solid capital position supports Arthur J. Gallagher in its growth initiatives. This Zacks Rank #3 (Hold) insurance broker estimates more than $2.5 billion for mergers and acquisitions, consisting of $1 billion in cash, about $650 million of net cash generation in the second half of 2021, and $600 million to $700 million of borrowing capacity.

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

Arthur J. Gallagher remains focused on long-term growth strategies for delivering organic revenue improvement and pursuing strategic mergers and acquisitions. Its focus on productivity improvements and quality enhancements should help AJG post sturdy numbers in the future.

Other Acquisitions in the Same Space

Given the insurance industry’s adequate capital level, players like Athene Holdings ATH, HCI Group Inc. HCI, and Stewart Information Services Corporation STC are pursuing strategic mergers and acquisitions.

Athene Holding has agreed to acquire Petros PACE Finance, LLC, a leading provider of long-term C-PACE financing to commercial property owners, to bolster Athene’s growth in C-PACE financing that is driven by new market expansion, sustainable construction and regulatory climate mandates.

Athene boasts impressive inorganic growth, driven by several buyouts and block reinsurance transactions with several companies. ATH expects its inorganic growth channel to continue to be an important driver in the future.

HCI Group Inc. has agreed to acquire United Insurance Holdings Corp.’s personal lines insurance business in the states of Georgia, North Carolina, and South Carolina. This transaction reinforces HCI Group’s growth strategy to expand into new geographies.

Well performing Homeowners Choice and TypTap coupled with conservative reserving practice should continue to drive HCI Group.

Stewart Information Services has acquired Devon Title Agency to expand in Michigan. Stewart Information has a sizable merger and acquisition pipeline.

Stewart Information Services remains focused on improving operational efficiencies by adding scale, investing in priority markets and strengthening core business with real estate technology and services.

Price Performance

Shares of Arthur J. Gallagher have gained 32.7% in a year, outperforming the industry’s increase of 25.1%. Efforts to ramp up the company’s growth profile and capital position should help the stock retain the price momentum.

Zacks Investment Research
Zacks Investment Research

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Shares of Athene, HCI Group and Stewart Information have gained 91.6%, 68.4% and 51.5%, respectively, in the same time frame.

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Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Stewart Information Services Corporation (STC) : Free Stock Analysis Report

HCI Group, Inc. (HCI) : Free Stock Analysis Report

Athene Holding Ltd. (ATH) : Free Stock Analysis Report

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