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Brown & Brown's Unit Buyout to Expand Dealer Services Team

Brown & Brown, Kentucky, Inc., a unit of Brown & Brown, Inc. BRO, recently purchased substantially all the assets of Dealer Associates, Inc. The transaction will enable the insurance broker to expand its Dealer Services team while building a strong presence in the Southwest region of the United States.

Established in 1990, Dealer Associates has been catering to the needs of auto dealers in Texas and across other states of the United States, offering a wide range of F&I (Finance and Insurance) and Products along with F&I, Sales and Service Training, Financial Performance Consulting plus Reinsurance Management Services. The company has been successful in its objective to maintain position as an independent representative, providing tailor-made programs, products, training and consultation to maximize dealers’ profitability. Notably, the company boasts annual revenues of about $8.5 million. The team at Dealer Associates will be part of Brown & Brown Dealer Services practice.

From the standpoint of Dealer Associates, Brown & Brown’s arm proved to be a cultural fit, given its team-based values. With this buyout, Dealer Associates will be able to help the acquirer’s clients expand their respective businesses through additional insurance products and customized solutions. The transaction will offer a chance to introduce employee benefits, liabilities and other coverage options that will help dealers conduct their businesses in a cost-effective manner, thus strengthening its position in the automotive space.

Brown & Brown’s Dealer Services will not only get an opportunity to extend the team but also add a valuable experience to it. The acquirer is expected to benefit from the strength of Dealer Associates’ market-leading position in the automotive space and its success in remaining as an independent representative by offering tailor-made consultation to maximize profitability and performance.

The latest consolidation will not only solidify the buyer’s operations in the Southwest region of the United States but also lend a vital support to ramping up its inorganic growth profile and 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 and broaden its scope of operations. Also, these strategic endeavors braced 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 while for 2019, the metric is expected to be in the band of $210-$220 million.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 7% in a year’s time, outperforming its industry’s increase of 6.5%. 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 into account, there have been a significant number of acquisitions in the space of late. Recently, Arthur J. Gallagher & Co. AJG purchased a 40% equity interest in PT IBS Insurance Broking Service and a 100% stake in IBS Re Singapore. Also, property and casualty (P&C) insurer Arch Capital Group Ltd. ACGL recently completed its previously announced buyout of McNeil & Co. that will help serve its clients’ needs more effectively and offer better growth opportunities to its team. In November, Marsh & McLennan Companies, Inc.'s MMC subsidiary Mercer acquired Summit Strategies Group.

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

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