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Arthur J. Gallagher Buys California-Based Garnett-Powers

Zacks Equity Research

Arthur J. Gallagher & Co. AJG recently acquired University Services Business of Garnett-Powers & Associates Insurance Services, Inc. The terms of the transaction have not been revealed.

California-based Garnett-Powers & Associates' University Services business was established in 1996. The company provides medical, dental, vision, life, AD&D and disability insurance plans to university postdoctoral scholars and visiting scholars as well as health insurance plans to university students. The acquisition is a strategic fit as it will help Arthur J. Gallagher ramp up its higher education practice. This marks the 10th buyout so far this quarter.

Arthur J. Gallagher is one of the top five global brokers, having a presence in the United States, Australia, Bermuda, Canada, the Caribbean, New Zealand and the United Kingdom.  In the first half of 2019, the company completed 24 acquisitions, which should add about $193 million of annualized revenues. Its merger and acquisition pipeline is quite strong with about $400 million of revenues, which is expected to fuel inorganic growth. Given its solid capital position, the company is well poised to pursue more strategic buyouts.  The company targets about $1.5 billion of mergers and acquisitions with free cash and debt

The Zacks rank #3 (Hold) insurance broker remains focused on its long-term growth strategies of delivering organic revenue growth and pursuing strategic mergers and acquisition. 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 3.6% quarter to date, outperforming the industry’s rise of 0.2%. The company’s policy 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 the significant capital available. Brown & Brown, Inc. BRO unit Brown & Brown Insurance Agency of Virginia, Inc. bought WBR Insurance Agency, LLC, Wilson Insurance Agency, Inc., Bell Insurance Agency Corporation and Robertson Insurance Agency, Co last month.

Stocks to Consider

A few better-ranked insurers are eHealth EHTH and Alleghany Y, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth provides private health insurance exchange services to individuals, families, and small businesses in the United States and China. The company delivered positive earnings surprise of 124.39% in the last reported quarter.   

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprise of 30.80% in the last reported quarter

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