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Brown & Brown (BRO) Acquires Finance Builders, Boosts Portfolio

Brown & Brown, Inc.’s BRO subsidiary Brown & Brown Dealer Services (BBDS) has acquired all the assets of Finance Builders Inc. The addition of Finance Builders will boost Brown & Brown’s presence in Connecticut and Massachusetts.

Finance Builders, being an independent sales and service organization, furnishes F&I products and sales support to automotive dealers. While the buyout will enable BBDS to expand in Connecticut and Massachusetts. Finance Builders will be able to leverage BBDS’ broader resources and diverse product offerings. This marks the first acquisition by Brown and Brown in the fourth quarter of 2022.

Brown & Brown and its subsidiaries continuously make strategic acquisitions to expand globally, add capabilities and boost operations.  These strategic buyouts help Brown & Brown increase commissions and fees, which, in turn, drive revenues. In the first nine months of 2022, Brown & Brown made 21 acquisitions.

Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments.  The company intends to make consistent investments to drive organic growth and margins. Its solid earnings have allowed the company to expand its capabilities, with the buyouts extending the company’s geographic footprint.

Consistent operational results have been aiding Brown & Brown in generating solid cash flows for deployment in strategic initiatives. It has maintained a strong liquidity position, with $579.5 million of cash and cash equivalents.

Given the insurance industry’s adequate capital level, players like Arthur J. Gallagher & Co. AJG has been pursuing strategic mergers and acquisitions.

Arthur J. Gallagher has acquired Doyle Insurance Brokers (Wexford) Limited in November 2022. It is also known as Doyle Mahon Insurances. The addition of Doyle Mahon Insurances to Arthur J. Gallagher’s portfolio provides the latter with better growth opportunities and further augments the insurer’s presence in Ireland.

AJG’s merger and acquisition pipeline is quite strong, with about $400 million of annualized revenues, associated with about 50 term sheets either agreed upon or being prepared. A solid capital position supports AJG in its growth initiatives. It, thus, remains focused on continuing its tuck-in mergers and acquisitions.

Price Performance

Shares of this Zacks Rank #3 (Hold) insurance broker have lost 10.7% in a year, compared with the industry’s decline of 6.9%. Nevertheless, sustained operational performance, higher commissions and fees, and a sturdy capital position will help the broker bounce back.

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Zacks Investment Research


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Stocks to Consider

Some better-ranked insurers from the insurance industry are Ryan Specialty Holdings Inc. RYAN and Erie Indemnity Company ERIE. While Ryan Specialty sports a Zacks Rank #1 (Strong Buy), Erie Indemnity carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ryan Specialty’s earnings surpassed estimates in each of the last four quarters, the average beat being 16.84%.

The Zacks Consensus Estimate for RYAN’s 2022 and 2023 earnings per share indicates a year-over-year increase of 14.8% and 18.9%, respectively.

The Zacks Consensus Estimate for Erie Indemnity’s 2022 and 2023 earnings per share indicates a year-over-year increase of 1.6% and 20.1%, respectively.

The Zacks Consensus Estimate for ERIE’s 2023 earnings has moved 5% north in the past 30 days.


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