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Brown & Brown (BRO) Unit Buyout to Enrich Service Portfolio

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Brown & Brown (BRO) Unit Buyout to Enrich Service Portfolio

Brown & Brown (BRO) arm buys Rodman Insurance, which is anticipated to add substance to the company's service portfolio via a comprehensive suite of P&C insurance products and services.

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

Established in 1935, Rodman Insurance has successfully built a reputation for itself by providing property and casualty (P&C) insurance products and services. The company caters to clients including commercial customers in the real estate, habitational, restaurant and transportation industries across Massachusetts and the Northeast region, generating annual revenues of about $9.5 million. Post closure of the buyout, Rodman Insurance will operate from its Needham MA-based office.

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

The acquisition will prove to be a great strategic fit for Brown & Brown as the company is highly optimistic about leveraging Rodman Insurance’s strong presence, experience and a much broader array of resources to fortify its own portfolio. Hence, this inorganic action is expected to further help the company strengthen its service platform by presenting abundant opportunities as well as add stimulus to its inorganic growth story.

The latest consolidation will not only solidify the buyer’s operations in the aforementioned region but also lend a vital support to ramping up its inorganic growth profile as well as boosting its margin expansion. Moreover, the company is anticipated to gain traction from this takeover in terms of reinforcing its product and service offerings.

The above-mentioned inorganic ploys braced the company to fuel growth as well as broaden its scope of operations. Also, these calculated steps bolstered Brown & Brown to increase its commissions and fees, which in turn, contributed to revenue growth. In fact, the company projects its 2018 revenues to range between $17.5 million and $21 million.

Shares of this Zacks Rank #3 (Hold) insurance broker have rallied 15.2% in a year’s time, outperforming its industry’s increase of 8.1%. 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.

 

Insurer on Integration Spree

Taking the insurance industry’s all-time high available capital resource into account, there has been a noticeable trend of acquisitions in the space of late. Recently, Arthur J. Gallagher & Co. AJG acquired Meridian One Corporation, which in turn, will add a significant value to its Affinity segment and also enhance its already strong inorganic portfolio.

Stocks That Warrant a Look

Investors interested in better-ranked stocks from the insurance industry can consider MGIC Investment Corporation MTG and MetLife, Inc. MET, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MGIC Investment provides private mortgage insurance and ancillary services to lenders and government-sponsored entities in the United States. The company delivered positive surprises in all the trailing four reported quarters, the average beat being 34.32%.

MetLife engages in the insurance, annuities, employee benefits and asset management businesses. The company came up with positive surprises in the preceding four reported quarters, the average earnings surprise being 9.67%.

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