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Arthur J. Gallagher (AJG) Closes Buyout of Warner Benefits

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Arthur J. Gallagher & Co. (AJG - Free Report) recently acquired JP Warner Associates, Inc. The details of the transaction were not made public.

Wayne, Pa.-based JP Warner Associates, Inc., dba Warner Benefits, formed in 1997, is an employee benefits management, consulting and brokerage firm with three locations in Pennsylvania including Wayne, Whitehall, and Center Valley.

The firm assists employees and their families to maximize cash flow efficiency and pre-tax payment of insurance benefits costs. It offers advice, negotiates costs and administers outsourced details for employers and individuals in managing highly-valued benefit programs. Since 1997, the firm has been serving privately & publicly held employers for-profit & non-profit employers as well as union & non-union populations.

We believe Warner Benefits is a strategic fit for Arthur J. Gallagher. This is because the buyout will boost and enhance the acquirer’s consulting capabilities in the greater Philadelphia metropolitan area. Also, this transaction will escalate Gallagher’s services into the Lehigh Valley.

Notably, the latest deal marks Arthur J. Gallagher’s fourth buyout in the fourth quarter of 2020. Its robust capital position along with sustained solid operational performance should continue to back its inorganic efforts.

Inorganic Growth Story

Acquisitions enable this Zacks Rank #2 (Buy) insurance broker to expand into desirable geographic locations, further extend its presence in retail and wholesale insurance and reinsurance brokerage services markets and increase the volume of general services currently provided. Its inorganic pipeline remains strong, with revenues of about $350 million associated with 40 term sheets either agreed upon or being prepared.

In the first nine months of 2020, the company completed 17 mergers, representing about $151.2 million of annualized revenues. Revenue growth rates have generally been in the range of 2.5% to 15% for 2020 acquisitions. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe and the United States. The company remains focused on its long-term growth strategies of delivering organic revenue growth and pursuing mergers and acquisitions.

Another Acquisition in the Same Space

There have been a host of acquisitions in the insurance space of late, given the significant capital available. Recently, Brown & Brown’s (BRO - Free Report) subsidiary bought CoverHound and its wholly owned subsidiary, CyberPolicy.

Price Performance

Shares of the insurance broker have gained 25.1% in a year, outperforming the industry’s growth of 4.8%. Efforts to ramp up the company’s growth profile and capital position should help shares bounce back.


Other Stocks to Consider

Some other top-ranked companies in the insurance industry are eHealth (EHTH - Free Report) and First American Financial (FAF - Free Report) , each sporting a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

eHealth surpassed estimates in each of the last four quarters, with the average being 83.27%.

First American surpassed estimates in three of the last four quarters and missed in one, with the average being 16.83%.

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