Brown & Brown (BRO) Unit Expands in Automotive Aftermarket
Brown & Brown, Inc.’s BRO subsidiary, Brown & Brown Dealer Services, has purchased ABS Risk, LLC and ABS Operations, LLC, together known as ABS. The addition of ABS will boost Brown & Brown’s presence in the warranty solutions marketplace.
ABS is a leading administrator of warranty products in the automotive aftermarket. With more than two decades in service, ABS provides nationwide parts and labor repair warranties, national road hazard programs and component-specific warranties. The addition of ABS will enhance BRO’s capabilities in the marketplace. This marks the eighth acquisition by Brown and Brown in the quarter to date.
Meanwhile, ABS stands to gain from Brown & Brown’s portfolio of leading insurance programs and automotive F&I products.
Brown & Brown and its subsidiaries continuously make strategic acquisitions to expand globally, add capabilities, boost operations and expand margins. Also, these strategic buyouts help Brown & Brown increase commissions and fees, which, in turn, drive revenues. Consistent operational results have been aiding Brown & Brown in generating solid cash flows for deployment in growth initiatives.
Shares of this Zacks Rank #2 (Buy) insurance broker have gained 30.2% year to date, outperforming the industry’s rise of 15.2%. A sustained operational performance, higher commissions and fees, and a sturdy capital position will help the broker retain the momentum.
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Acquisitions by Industry Players
Arthur J. Gallagher & Co. AJG recently closed the buyout of The Evans Agency. The acquisition was announced last month. The acquisition will consolidate the acquirer’s presence in Western New York.
Arthur J. Gallagher is growing through mergers and acquisitions, most of which are within its Brokerage segment. AJG has a solid merger and acquisition pipeline with about 45 term sheets either agreed upon or being prepared, representing more than $450 million of annualized revenues. Revenue growth rates generally range from 5% to 20% for 2023 acquisitions. It continues to expect M&A capacity upward of $3 billion through the end of 2023 and another $3.5 billion in 2024 without using any equity.
Marsh & McLennan Companies, Inc.’s MMC business, Mercer, recently agreed to buy the outsourced chief investment officer (OCIO) business of Vanguard, a leading investment management firm. The move is expected to boost Mercer’s position in the OCIO space.
The acquisition underscores Marsh & McLennan's strategic inorganic growth approach, exemplified by various purchases across its operating units. These acquisitions have facilitated entry into new regions, expansion in existing ones, diversification into new businesses and the development of new segments. The prudent acquisitions position the company for sustained long-term growth.
Another Stock to Consider
Another top-ranked stock from the brokerage insurance space is Erie Indemnity ERIE, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Erie Indemnity delivered a four-quarter average earnings surprise of 10.03%. ERIE has gained 21.2% year to date. The Zacks Consensus Estimate for ERIE’s 2023 and 2024 earnings per share is pegged at $8.53 and $9.85, indicating a year-over-year increase of 49.4% and 15.5%, respectively.
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