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Brown & Brown's Unit Buyout to Improve Service Portfolio

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Brown & Brown's Unit Buyout to Improve Service Portfolio

Brown & Brown (BRO) arm buys Vandroff Insurance, which is anticipated to add value to its service portfolio while providing a combination of coverage, service and price.

Brown & Brown of Florida, Inc., a unit of Brown & Brown, Inc. BRO, recently purchased substantially all the assets of Vandroff Insurance Agency, Inc. The buyout will help the insurance broker improve its service portfolio while adding capabilities to the same. However, financial details of the transaction have been kept under wraps.

Vandroff Insurance has successfully built a reputation for itself with a 120-year old history of being a family owned agency in Jacksonville. The insurance agency offers a broad range of personal and business insurance products and services and boasts delivering an excellent comprehensive package of coverage, service and price. The company helps its clients analyze their risk exposure and ultimately determine the suitable coverage. The firm caters to clients across Jacksonville and Northern Florida while generating annual revenues of about $1 million. Post completion of the buyout, Vandroff Insurance will operate from Brown & Brown’s Jacksonville office.

The team at Vandroff Insurance will bring in strong expertise, resources and goodwill, which in turn, can aid Brown & Brown to improve the quality of services made available to its clients. The transaction will allow both the acquirer and the acquired to add more depth and value to a suite of services offered to respective clients and enhance customer relations.

The acquisition will prove to be a great tactical move for Brown & Brown with the insurance broker being optimistic in leveraging Vandroff Insurance’s strong presence, experience and business insights. Hence, this inorganic action is expected to enable the insurance broker further strengthen its service portfolio by presenting profitable opportunities and assisting the company to add substantial value to its inorganic portfolio.

The latest integration will not only fortify the buyer’s operations in the aforementioned region but also lend support to ramping up its inorganic growth profile as well as boosting its margin growth. Moreover, the company is expected to gain traction from this transaction in terms of reinforcing its product and service portfolio.

The above-mentioned inorganic strategies braced the company to fuel growth as well as expand its scope of operations. Also, these calculated initiatives bolstered Brown & Brown to increase its commissions and fees, which in turn, contributed to revenue growth. In fact, the company projects to gross revenues for 2018 between $4 million and $8 million.

Shares of this Zacks Rank #3 (Hold) insurance broker have rallied 16.9% year to date, outperforming its industry’s increase of 6.7%. We expect the company’s sustained operational performance, higher commissions and fees plus a solid capital position to push the stock higher in the near term.

Insurers on Integration Spree

Taking the insurance industry’s all-time high available capital resource into account, there has been a noticeable rage for acquisitions in the space of late. Arthur J. Gallagher & Co. AJG acquired Rogers & Young Insurance Services, LLC, which will help the acquirer consolidate its capabilities to better serve its customers. Also, Markel Corporation MKL has agreed to buy Nephila Holdings Limited. The acquisition will uphold Markel as the largest fund manager in insurance-linked securities sector. Further, Enstar Group Limited ESGR will take over Maiden Reinsurance North America, Inc. from a subsidiary of Maiden Holdings, Ltd. MHLD.

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

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