Arthur J. Gallagher & Co. AJG recently announced the acquisition of Pointer Insurance Agency. The buyout is likely to improve its employee benefits consulting and brokerage operations. Moreover, the transaction will help the acquirer to strengthen its retail brokerage presence in the Northern Mississippi and Memphis region. However, financial details of the transaction have been kept under wraps.
Established in 1924, Southaven, MS-based Pointer Insurance provides a wide range of property/casualty coverages with its main focus on commercial and residential construction, restaurants, the hospitality industry as well as artisan contractors. This apart, the company also offers health, life, disability and long-term care coverages for individuals and families. The company caters to the various needs of businesses and individuals across Mississippi and Tennessee. On completion of the buyout, the team at Pointer Insurance will continue to operate from their current office location.
This latest transaction is anticipated to be substantially accretive to the acquirer’s already robust inorganic portfolio. The insurance broker will leverage Pointer Insurance’s market-leading position in providing specific insurance coverages, giving its clients the best value for their money. This in turn will allow the company to improve service offering in the Mid-South and South Central region of the United States. Moreover, this will help the acquirer to serve its clients more efficiently and effectively, in turn achieving its operational goals. Consequently, this latest integration is expected to reinforce Arthur J. Gallagher’s solid inorganic growth profile and add capabilities to its insurance brokerage service suite.
Notably, Arthur J. Gallagher’s recent acquisition of Preston-Patterson Co. Inc. is also in sync with its strategy of enhancing retail property/casualty brokerage operations. The buyout will add capabilities to the insurance broker’s array of insurance brokerage services for broadcasters and media clients.
Arthur J. Gallagher’s discreet M&A activity bears testimony to its convincing inorganic growth strategy. In the first nine months of 2018, this Zacks Rank #2 (Buy) insurance broker successfully closed 27 acquisitions with annualized revenues of about $234 million. Moreover, its inorganic pipeline remains robust with about $500 million of revenues. The company flaunts an impressive growth profile, driven by organic sales plus merger and acquisition (M&A) activities. The company remains upbeat about its ability to tow in integration partners in its typical small tuck-in size at justifiable prices.
M&A activity, an inorganic growth strategy and one of the key trends in 2018, has been adding fuel to the already bullish performance of the insurance industry.
Shares of the company have rallied 15.2% year to date, outperforming its industry’s increase of 4.4%. We expect top-line growth, smart acquisitions and a healthy capital position to push the shares up in the near term.
Insurers’ Inorganic Growth Story
Considering the insurance industry’s all-time high available capital, there have been a slew of crucial acquisitions in the space of late.
Recently, Horace Mann Educators Corporation HMN has agreed to acquire National Teachers Associates Life Insurance Company for $405 million. The acquisition will aid the company consolidate its presence as a provider of financial solutions to the education market. Further, Brown & Brown, Inc.’s BRO arm, Brown & Brown, Kentucky, Inc. purchased all the assets of Dealer Associates, Inc, in December, enabling the insurance broker to extend its Dealer Services team while fortifying its presence in the Southwest region of the United States.
In November, Marsh & McLennan Companies, Inc.'s MMC subsidiary Mercer bought Summit Strategies Group.
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