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Arthur J. Gallagher Expands in Asia with a Couple of Buyouts

Arthur J. Gallagher & Co. AJG has been expanding in Asia as evident from its latest buyouts. The Zacks Rank #3 (Hold) insurance broker recently purchased 40% equity interest PT IBS Insurance Broking Service and 100% stake in IBS Re Singapore. The terms of the deals have been kept under wraps.

Jakarta, Indonesia-based PT IBS Insurance Broking Service was founded in 1975 and is the first licensed insurance broker in the country with more than $10 million in revenues. The company provides risk services and insurance solutions to middle-market companies, small to medium-sized enterprises (SMEs) and individual customers across Indonesia. Notably, it focuses on real estate, banking and finance; forestry and agriculture; marine, manufacturing, energy, construction, plants and equipment, and motor industries.

IBS Re Singapore is a reinsurance broker having an alliance with Arthur J. Gallagher for more than 15 years. Addition of IBS Re Singapore will enhance capabilities of the acquirer’s London and Singapore-based Specialty and reinsurance operations.

Arthur J. Gallagher revenues are geographically diversified with strong domestic and international operations. In the first nine months of 2018, its international operations accounted for 29% of its top line. Given the number and size of the non-U.S. acquisitions, the insurance broker expects international contribution to total revenues to increase.

Given the insurance industry’s all-time high capital level, insurers are aggressively pursuing mergers and acquisitions to ramp up growth, expand footprint, enhance capabilities and diversify operations. The recent acquisitions take the total number of buyouts by the company in ongoing quarter to 11. Arthur J. Gallagher’s inorganic pipeline remains strong with about $500 million of revenues.

Shares of Arthur J. Gallagher have rallied 21.8% year to date, outperforming the industry’s increase of 13.9%. The company’s expansion policy to ramp up its growth and a strong capital position should continue to drive shares higher.


Insurers on Integration Spree

Taking the insurance industry’s all-time high available capital into account, there have been a significant number of acquisitions in the space of late. Last month, Brown & Brown, Inc. BRO acquired Hays Companies to ramp up its employee benefits business while Marsh & McLennan Companies, Inc.'s MMC unit Mercer acquired Summit Strategies Group.

A Stock That Warrants a Look

A better-ranked stock from the same space is Willis Towers Watson Public Limited Co. WLTW, carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Willis Towers operates as an advisory, broking and solutions company worldwide. The company delivered average four-quarter positive surprise of 7.13%.

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