Compelling Inorganic Growth Story for AJG
Arthur J Gallagher & Co. (AJG) has been on an uptrend reflecting investors’ enthusiasm about its impressive inorganic growth story. Shares gained almost 28% year–to–date. The insurance broker announced yet another acquisition recently.
Arthur J. Gallagher & Co. acquired New York-based fine arts broker team of Jeffrey Haber and Michael Fischman. With this acquisition, the tally reaches four for the month and six for the current quarter. This also compares favorably with five acquisitions (with annualized revenues totaling $35.9 million) closed in the preceding quarter. The company’s strong financial position continues to support the acquisitions.
The acquisition complements the acquirer’s product portfolio as the broker team of Haber and Fischman provides retail insurance products and risk management services in the U.S. with specialization in insurance coverage for art galleries and dealers, museums, and high net worth collectors. Moreover, it will also enhance the acquirer’s operations in the Northeast Region.
Arthur J. Gallagher & Co. undertakes acquisitions to augment its product and service offerings as well as expand its international exposure. Transactions earlier in September include adding Belmont International based in Kent, England; Eau Claire, Wis.-based R. W. Scobie, Inc.; and London-based Giles Group of Companies (Giles) to its portfolio.
While adding Belmont, provider of retail insurance and employee benefit products and services, will leverage Arthur J Gallagher & Co.’s foothold in southeastern U.K. and also enhance its product portfolio, acquisition of Scobie will augment the company’s wholesale network. The Giles acquisition will expand the company’s footprint in England and Scotland and help it to make a foray into Northern Ireland, Wales, Isle of Man and the Channel Islands. It will also inflate Arthur J. Gallagher & Co.’s client base in the middle-market and enhance its underwriting footprint via current underwriting business and increased retail distribution opportunities through broker networks.
With respect to earnings performance, Arthur J Gallagher & Co. delivered straight quarters of positive surprise with an average beat of almost 14%. We expect the trend to continue as our proven model shows that Arthur J. Gallagher & Co. has the right combination of positive Earnings ESP and Zacks Rank. Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.80%. Arthur J. Gallagher & Co. presently carries a Zacks Rank #3 (Hold).
Arthur J Gallagher & Co. has been witnessing rising earnings estimates, reflecting analysts’ confidence on the solid execution of the company. Over the last 30 days, the Zacks Consensus Estimate for 2013 moved north by 0.5% to $2.21 as 4 of 12 estimates were raised. For 2014 also, 4 of 12 estimates moved up pushing the Zacks Consensus Estimate by 1.6% to $2.59.
Among other insurance brokers, in August, Mercer, consulting wing of Marsh & McLennan (MMC) announced its intention to purchase the pension wind-up operations of PricewaterhouseCoopers (PwC) in Canada, in a bid to expand its operations in the country. Brown & Brown Inc. (BRO) closed its merger with Beecher Carlson Holdings, Inc. in July.
In the insurance space, property and casualty insurer AmTrust Financial Services, Inc. (AFSI) also boasts of a strong history of acquisitions. Recently, AmTrust Financial inked a deal to buy the Insco Dico Group (Insco Dico) for about $85 million, in an effort to strengthen its foothold in the domestic surety insurance market.
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