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First American (FAF) Inks a Deal to Acquire Mother Lode

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First American Financial Corporation (FAF - Free Report) recently agreed to acquire Mother Lode Holding Company. The transaction is expected to close pending regulatory conditions.

Mother Lode Holding Company is a CA-based provider of title insurance, underwriting and escrow services for residential and commercial real estate transactions. It aims to provide title and title-related products and services throughout the United States and continues to extend its commercial and residential services. The company has 17 operating subsidiaries throughout the United States, primarily in California, Idaho, Montana, Wyoming, Texas, Arizona, Washington and New Mexico.

With this deal, FAF will leverage Mother Lode Holding Company’s competence in customer service. The acquisition is likely to broaden First American’s exposure in the crucial growth markets, enhance the insurer’s capabilities to better serve customers across the strongest housing markets as well as fortify its presence in the United States.

As far as customers of Mother Lode Holding Company is concerned, they will gain from improved underwriting resources and the industry’s largest property and ownership dataset, as well as access to other industry-leading resources for residential transactions.

In line with its strategic initiatives, First American actively pursues acquisitions to boost and expand its core business. In October 2021, First American acquired ServiceMac, LLC to enhance First American’s ability to provide lenders and servicers with end-to-end mortgage, settlement, post-closing services and servicing-related products and solutions. Other notable acquisitions made by the title insurer include Docutech, Title Security Agency and the acquisition of Georgetown Title in July 2021.

The title insurer also pursued small title agency buyouts in the regions that it identifies as growth markets. It also continues to make significant investments in technology across all its major businesses to enhance customer experience through digital solutions.

Therefore, this buyout is likely to bolster and expand the insurer’s title insurance business and escrow services, which in turn contribute to the top-line growth of the company.

Price Performance

Shares of this currently Zacks Rank #2 (Buy) property and casualty insurer have outperformed the industry in a year’s time. The stock has gained 52.8%, outperforming the industry’s increase of 20.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Other Acquisitions in the Same Space

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

Brown & Brown’s subsidiary Brown & Brown Lone Star Insurance Services has purchased HARCO to boost its presence in Texas. 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.

Arthur J. Gallagher & Co. acquired Risk Transfer Insurance Agency, 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.

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 Brown and Brown, Arthur J. Gallagher and HCI Group have gained 51.8%, 42.9% and 48.3%, respectively, in a year’s time.