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Arthur J. Gallagher Buyout to Boost Captive Management Skills

Arthur J. Gallagher & Co. AJG recently acquired Captive Insurance Company Design and Operations, which will not only improve its service portfolio but also add significant value to its captive management experience when it comes to the medical and professional liability and healthcare space. However, financial details of the transaction were kept under wraps.

Founded in 2002 by Clarity Group, Inc., Captive Insurance operates as a captive consultant with its main focus lying on medical and professional liability. The company caters to the various needs of captive participants across the United States. It is important to note that captive participants are essentially healthcare providers from different industry areas including medical facilities, physicians and senior care organizations. On completion of the buyout, the team at Captive Insurance will shift its operations to the insurance broker’s Rolling Meadows, IL-based office.

This latest transaction is anticipated to be substantially accretive to the acquirer’s already robust inorganic portfolio. Captive Insurance provides its customers with an in-depth captive management expertise in the aforementioned areas besides trained staff. This will further allow the company to serve its clients more efficiently and effectively, achieving its operational goals.

The consolidation will enable the acquirer to enhance and extend its capabilities by leveraging Captive Insurance’s strength in medical and professional liability and healthcare space. This in turn, will improve the insurance broker’s service offering in the Midwest region of the United States. Thus, this latest integration is expected to reinforce Arthur J. Gallagher’s solid inorganic growth profile and add capabilities to its insurance brokerage service suite.

With respect to medical and healthcare arena, the insurance broker’s Healthcare division boasts a team of exceptionally talented staff with the ability to deliver high-quality insurance services in the most cost-effective manner possible. This will again allow the company to simplify the health insurance process for its clients by securing insurance coverage and offering risk management solutions.

In relation to improving its retail property/casualty brokerage operations, Arthur J. Gallagher acquired Los Angeles, CA-based JP Tech Insurance Services, Inc. This buyout is projected to solidify and extend the insurance broker’s skills.

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.

Mergers and acquisitions (M&A) activity, an inorganic growth tactic and one of the key trends in 2018, has been driving the already bullish performance of the insurance industry.

Shares of the company have rallied 17.7% year to date, outperforming its industry’s rise of 9%. 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, Brown & Brown, Inc.’s BRO arm, Brown & Brown, Kentucky, Inc. purchased substantially all the assets of Dealer Associates, Inc, which will enable the insurance broker to extend its Dealer Services team while cementing a strong foothold in the Southwest region of the United States. Also, property and casualty (P&C) insurer Arch Capital Group Ltd. ACGL recently completed its previously announced buyout of McNeil & Co. that will help serve its clients’ requirements more efficiently and offer better growth opportunities to its team. In November, Marsh & McLennan Companies, Inc.'s MMC subsidiary Mercer bought Summit Strategies Group.

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

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