Back to top

Image: Bigstock

Brown & Brown (BRO) Expands in Texas With HARCO Acquisition

Read MoreHide Full Article

Brown & Brown, Inc.’s (BRO - Free Report) subsidiary Brown & Brown Lone Star Insurance Services, Inc. has purchased HARCO. The addition of HARCO will boost Brown & Brown’s presence in Texas.

HARCO Insurance Services, Inc. d/b/a HARCO Insurance Services and Lone Star Affiliates, Inc. d/b/a HARCO Financial Services are collectively referred to as HARCO. HARCO, a full-service, independent retail insurance agency, has been providing its services to businesses and individuals throughout Texas. This marks Brown and Brown’s first buyout this year.

Brown & Brown and its subsidiaries continuously make strategic acquisitions to expand globally, add capabilities and boost operations. Also, these strategic buyouts help Brown & Brown increase commissions and fees, which, in turn, drive revenues.

Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. Strategic acquisitions and mergers help it spread its operations. Through the first nine months of 2021, this Zacks Rank #2 (Buy) insurance broker completed 11 acquisitions with annual revenues of approximately $65 million.  Brown & Brown intends to make consistent investments in boosting organic growth and margin expansion. Its solid earnings have allowed the company to expand its capabilities, with the buyouts extending the company’s geographic footprint.

Consistent operational results have been aiding Brown & Brown in generating solid cash flows for deployment in strategic initiatives. It has maintained a strong liquidity position, with $944 million of cash and cash equivalents as well as $800 million of accessible capital on revolver credit.

Shares of Brown and Brown have rallied 48.4% in a year, outperforming the industry’s rise of 31.7%. A sustained operational performance, higher commissions and fees and a sturdy capital position will help the broker retain the momentum.

Zacks Investment ResearchImage Source: Zacks Investment Research

Given the insurance industry’s adequate capital level, players like Arthur J. Gallagher & Co. (AJG - Free Report) , Stewart Information Services Corporation (STC - Free Report) and HCI Group Inc. (HCI - Free Report) are pursuing strategic mergers and acquisitions.

Arthur J. Gallagher & Co. acquired Five Points Benefits Solutions, LLC. Arthur J. Gallagher boasts an impressive inorganic story. AJG’s merger and acquisition pipeline is quite strong with about $400 million revenues associated with nearly 50 term sheets either agreed upon or being prepared. The insurance broker estimates more than $2.5 billion for mergers and acquisitions consisting of $1 billion in cash, about $650 million of net cash generation in the second half of 2021, and $600 million to $700 million of borrowing capacity.

Stewart Information has acquired Devon Title Agency to expand in Michigan. Stewart Information has a sizable merger and acquisition pipeline. It boasts a strong balance sheet with $585 million over regulatory requirements and $74 million on an existing line of credit facility supporting growth initiatives. Stewart Information remains focused on improving operational efficiencies by adding scale, investing in priority markets and strengthening core business with real estate technology and services.

HCI Group has agreed to acquire United Insurance Holdings’ personal lines insurance business in the states of Georgia, North Carolina, and South Carolina to expand into new geographies. Well-performing Homeowners Choice and TypTap coupled with conservative reserving practice should continue to support HCI’s growth story.

Shares of Arthur J. Gallagher, Stewart Information and HCI Group have gained 39.6%, 61.9% and 61.8%, respectively, in a year’s time.  

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

Published in