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Arthur J. Gallagher Expands in Canada With Keyser Benefits

Zacks Equity Research

Arthur J. Gallagher & Co. AJG has acquired Keyser Benefits Corp. that will not only improve its employee benefits consulting and brokerage operations, but also strengthen its Canadian footprint. However, financial details of the transaction have been kept under wraps.

Over the past 45 years, Calgary, Alberta-based Keyser Benefits has been operating as a full-service benefits brokerage firm, providing life, disability, health and dental, critical illness, retirement and other services. The company caters to small to mid-sized businesses and individuals throughout Western Canada. The primary objective is to offer benefits that will enable the respective client businesses to enhance performance, develop loyalty and provide a better incentive to quality employees to join and stay on with the businesses. Post completion of the buyout, Keyser Benefits will be shifting to the acquirer’s benefits office in Calgary.

With this acquisition, Arthur J. Gallagher is likely to gain from Keyser Benefits’ client-focused, family-oriented and ethically strong business model. Apart from boosting the insurance broker’s employee benefits consulting and brokerage operations, the buyout is expected to expand its growing global team. Moreover, the accretion of Keyser Benefits’ operations will complement and fortify the acquirer’s already existing geographic footprint.

With respect to strengthening the Canadian footprint, Arthur J. Gallagher acquired broker Jones Brown Inc. and its subsidiaries on Jan 8, 2019. The buyout is likely to bring in substantial value addition to its business and clients across Canada.

Given the insurance industry’s all-time high capital level, insurers are aggressively pursuing mergers and acquisitions to ramp up growth, expand geographies, enhance capabilities and diversify operations. Moreover, its inorganic pipeline remains robust with about $130 million of annualized revenues in 2019. The company flaunts an impressive growth profile, driven by organic sales plus a slew of merger and acquisition (M&A) activities. It remains upbeat about its ability to tow in integration partners within its typical small tuck-in size at justifiable prices.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 6.2% year to date, underperforming its industry’s rally of 17.2%. We expect top-line growth, prudent acquisitions and a healthy capital position to push the company’s shares up in the near term.

Other Insurers Following Suit

Considering the insurance industry’s high available capital, there has been a host of significant acquisitions in the space of late.

In March, Cincinnati Financial Corporation CINF closed the previously announced (Oct 12, 2018) buyout of MSP Underwriting Limited, a reputed global specialty underwriter and a unit of Munich Re. Cincinnati Financial stands to benefit from MSP Underwriting’s experienced underwriting team while lending a boost to its business lines. Additionally, Marsh & McLennan Companies, Inc.’s MMC subsidiary Marsh & McLennan Agency LLC has signed an agreement to buy Centurion, which is located at Plymouth Meeting, PA.

Also, Beecher Carlson Insurance Services, LLC, a subsidiary of Brown & Brown, Inc. BRO, has purchased certain assets of Donald P. Pipino Company. The transaction will not only enable the insurance broker to enhance its service portfolio, but also provide a wide range of resources and extended service plus consulting capabilities to its clients.

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

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