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Brown & Brown, Inc. BRO subsidiary Brown & Brown Dealer Services (“BBDS”) has acquired considerably all of MAJ Companies Ltd.’s (MAJ) assets.
MAJ Companies is made up of a team of companies dedicated to serving the aftermarket, consulting needs of auto dealers throughout the United States.
Each of the affiliated member companies has a specific area of expertise, which include aftermarket program and contract analysis, compliance and regulatory oversight, in-dealership training and development, and F&I performance management. Each of the companies supports and complements the other. It thrives to maximize the F&I profit potential of their dealer.
Rationale Behind the Deal
MAJ Companies and the team have 30 years of experience in serving the dealer partners by providing best-in-class F&I product and sales training, aftermarket program and contract analysis, and F&I performance management. Thus, its addition will boost growth and strengthen the presence of BBDS in Ohio and the Midwest.
As far as MAJ Companies is concerned, this transaction will allow its team to deliver high-quality programs to dealer customers and provide them access to better risk solutions.
Inorganic Growth Story
Brown & Brown along with its subsidiaries pursues frequent buyouts in order to achieve top-line growth. Its revenues have grown as a result of its continued focus on net new business growth and acquisitions. Notably, this latest transaction marks the fifth buyout by the insurance broker in the fourth quarter of 2020. During the nine months ended Sep 30, 2020, it closed 16 transactions, with estimated annual revenues of $116 million.
Consistent investments along with solid earnings will likely aid this Zacks Rank #2 (Buy) insurance broker in its inorganic efforts. These acquisitions drive Brown & Brown’s commission and fees, which, in turn, boost revenue growth.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
From 1993 through the third quarter of 2020, the company acquired 552 insurance intermediary operations. It remains well-positioned with its capital structure and has been able to access sufficient capital via its $1.1-billion available cash to fund growth. Moreover, consistent operational results have helped Brown & Brown to generate solid cash flows to be deployed in strategic initiatives.
Other Acquisitions in the Same Space
There has been a host of acquisitions in the insurance space of late, given the significant capital availability. Kemper Corporation KMPR agreed to acquire American Access Casualty Company and related captive insurance agency, Newins Insurance Agency Holdings, LLC, and its subsidiaries to strengthen the Specialty Auto segment. Brown & Brown announced that its subsidiary bought CoverHound and its wholly-owned unit, CyberPolicy. Arch Capital Group ACGL agreed to acquire Watford Holdings WTRE.
Shares of Brown & Brown have risen 18.2% in the past year, outperforming the industry’s growth of 4.1%. The company’s efforts to ramp up growth and capital position should continue to drive shares higher.
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