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Arthur J. Gallagher's Allied Insurance Buyout to Drive Growth

Zacks Equity Research

Arthur J. Gallagher & Co. AJG recently acquired Allied Insurance Brokers and its subsidiary, Ascinsure Specialty Risk. However, the transaction details were kept under wraps.

Notably, this Pittsburgh, PA-based Allied Insurance was founded in 1982. The company provides insurance and risk management services to the dealers of crane, scaffold, rental equipment and party goods. It caters to the clients across the United States and the non-profit social services organizations in Western Pennsylvania. Ascinsure is a program underwriting manager catering to the industries of cranes and scaffold.

We believe that the addition of Allied Insurance to the acquirer’s portfolio is a strategic fit at the moment. This is because the buyout will provide Arthur J. Gallagher with a distinguished capability, inventive loss control services, and a commitment to client advocacy. Additionally, it is likely to enhance Arthur J. Gallagher’s construction practice abilities and help lower clients' total cost of risk.

This latest transaction marks Arthur J. Gallagher’s 12th buyout so far this quarter. A strong capital position supported by sustained solid operational performance should continue to back inorganic efforts.

Arthur J. Gallagher, a global insurance brokerage firm, has an impressive growth track backed by solid organic sales and inorganic growth. Furthermore, the company’s merger and acquisition pipeline is quite strong with about $400 million of revenues. About $1.5 billion of merger and acquisitions is targeted by Arthur J. Gallagher with free cash and debt.  Also, solid organic growth is estimated in the second half of 2019.

Of late, there have been a number of other notable acquisitions in the insurance industry, given the significant capital available. Last month, Brown & Brown, Inc.’s BRO unit Brown & Brown of Florida, Inc. acquired all the assets of CKP Insurance, LLC.

A glance at this Zacks Rank #3 (Hold) insurance broker’s price trend quarter to date shows that it has gained 2.6%, outperforming the industry’s 0.1% increase. The company’s policy to ramp up its growth profile and capital position should continue to drive the share price higher.

Stocks to Consider

Some better-ranked insurance stocks are eHealth EHTH and Hallmark Financial Services HALL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth operates through two segments and provides services like private health insurance exchange in the United States and China to families, individuals and small businesses. The company came up with an average four-quarter positive surprise of 167.16%.

Hallmark Financial provides its services to individuals and businesses in the United States through its subsidiaries. It markets, distributes and services property and casualty products. Its average four-quarter positive surprise is 97.50%.

5 Stocks Set to Double

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