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Arthur J. Gallagher (AJG) Buys AOBG, Expands in Affinity Market

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Arthur J. Gallagher & Co. (AJG - Free Report) recently acquired LDJ American Online Benefits Group, LLC (AOBG). Terms of the transaction were kept under wraps.

Founded in 2013, Addison, TX-based AOBG is a program manager and has over 28 years of experience in the health, life and supplemental insurance markets. It designs, develops and markets supplemental health insurance and wellness products, which include short-term medical, hospital indemnity, AD&D, vision care and a wellness program. It caters to clients throughout the United States.

With this acquisition, Arthur J. Gallagher will leverage the expertise of AOBG in offering products that address the demands of self-employed and retired workers. This in turn will enhance and boost the acquirer’s capabilities in the Affinity market.

Inorganic Growth Story

Acquisitions enable Arthur J. Gallagher to expand into desirable geographic locations, 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 around $250 million of annualized revenues associated with 40 term sheets signed or being prepared.

Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the first quarter, the insurance broker completed five brokerage mergers, representing about $90 million of estimated annualized revenues. So far this year, it has made 13 acquisitions. Revenue growth rates have generally been 5-15% for 2021 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.

Other Acquisitions in the Same Space

There have been a host of acquisitions in the insurance space of late, given significant capital availability. In the ongoing second quarter of 2021, Brown & Brown, Inc. (BRO - Free Report) acquired substantially all Piper Jordan assets. Marsh & McLennan Companies, Inc.’s (MMC - Free Report) unit Marsh & McLennan Agency LLC (“MMA”) recently acquired PayneWest Insurance, one of the largest independent agencies in the United States. Alleghany Corporation’s (Y - Free Report) wholly-owned subsidiary Alleghany Capital Corporation acquired Wilbert, Inc. (WPS).

Price Performance

Shares of Arthur J. Gallagher have gained 55.3% in a year, outperforming the industry’s increase of 30.2%. Efforts to ramp up the company’s growth profile and capital position should help shares gain further.

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