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Arthur J. Gallagher (AJG) Buys Ohio-Based Andrew Insurance

Zacks Equity Research

Arthur J. Gallagher & Co. AJG recently acquired Andrew Insurance Associates to expand its practice areas. However, the details of the transaction are still kept under wraps.

Founded in 1969, Powell, OH-based Andrew Insurance Associates is a full-service insurance agency. Notably, it caters to clients across the Midwest. The company focuses on schools, hotels and grocery stores.

The addition of Andrew Insurance Associates to Arthur J. Gallagher’s portfolio is a strategic fit because the buyout will expand the latter’s presence in Columbus, OH. This will provide Arthur J. Gallagher with increased strength and stability, as well as help it to expand in the practice areas served.

Notably, a strong capital position and solid operational performance should continue to support the company’s inorganic efforts.

Arthur J. Gallagher has completed 542 mergers and acquisitions in a span of more than 17 years. Its merger and acquisition pipeline is quite strong, with revenue generation of about $400 million. The company targets about $1.5 billion of mergers and acquisitions with free cash and debt.

Shares of this Zacks Rank #3 (Hold) insurance broker has gained 2.2%, outperforming the industry’s 0.1% growth quarter to date. The company’s policy of ramping up the growth profile and capital position should continue to drive the share price higher.

The insurance industry has conducted a number of acquisitions recently, given the availability of significant capital. Last month, Brown & Brown, Inc.’s BRO units, Brown & Brown of Florida, Inc. and Brown & Brown of Massachusetts, LLC had acquired all the assets of CKP Insurance, LLC and Yozell Associates.

Stocks to Consider

Some better-ranked insurance stocks are eHealth EHTH and Palomar Holdings PLMR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth operates through two segments, and provides services like private health insurance exchange in the United States and China to families, individuals and small businesses. The company came up with an average four-quarter positive surprise of 167.16%.

Palomar Holdings provides personal and commercial specialty property insurance products. The company delivered an average four-quarter positive surprise of 25%.

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