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Arthur J. Gallagher Expands in Canada, Boosts Portfolio

Zacks Equity Research

Arthur J. Gallagher & Co. AJG has acquired Jones Brown Inc. and its subsidiaries to ramp up its commercial and personal insurance portfolio. The terms of the transaction have not been revealed.

Canada-based Jones Brown Inc. is a property/casualty insurance broker providing commercial and personal insurance from offices in Toronto and Hamilton, Ontario; Calgary, Alberta; and Vancouver, British Columbia. The addition of Jones Brown to Arthur J. Gallagher’s portfolio will help the latter serve clients better.

Buyouts not only expand geographical footprint but also strengthen a company’s portfolio. Arthur J. Gallagher has evolved over time and is now one of the top five global brokers. The company has been aggressively expanding outside the United States. Its recent acquisitions have helped it expand in New Zealand, Australia and United Kingdom.

Arthur J. Gallagher derives about one-third of its revenues from international operations. Given the number and size of its non-U.S. acquisitions, the Zacks Rank #4 (Sell) insurance broker expects international contribution to total revenues to increase. Also, Arthur J. Gallagher’s inorganic pipeline remains strong with about $500 million of revenues. The latest acquisition is the company’s third in the first quarter of 2019. Given its solid capital position, the company is well poised to pursue more strategic buyouts.

Shares of Arthur J. Gallagher have rallied 14% in a year, outperforming the industry’s growth of 3.9%. The company’s policy to ramp up its growth profile and a strong capital position should continue to drive share price higher.

Acquisition Spree in Insurance Space

Given the insurance industry’s all-time high available capital, there has been a significant number of acquisitions in the space of late. Last month, Brown & Brown, Kentucky, Inc., a unit of Brown & Brown, Inc. BRO, acquired Dealer Associates, Inc. to expand its Dealer Services team and consolidate in the Southwest region of the United States. Marsh & McLennan Companies, Inc.’s MMC Marsh & McLennan Agency LLC bought Otis-Magie Insurance Agency Inc. Horace Mann Educators Corporation HMN has agreed to acquire National Teachers Associates Life Insurance Company for $405 billion to consolidate its presence as a provider of financial solutions to the education market.

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

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