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Arthur J. Gallagher (AJG) Expands in England With Erimus

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Arthur J. Gallagher & Co. (AJG - Free Report) has acquired Erimus Group Limited. The terms of the transaction have not been disclosed.

Established in 1986, Tees-side, England-based Erimus is a retail insurance broker. Erimus provides commercial combined, business interruption, commercial property, cyber, D&O and employers liability insurance and has a solid presence in the North East of England.

The addition of Erimus to Arthur J. Gallagher’s portfolio will provide the acquirer with better growth opportunities as well as reinforce its presence in England.

Inorganic Growth Story

Arthur J. Gallagher boasts an impressive inorganic story. This Zacks Rank #3 (Hold) insurance broker closed five new tuck-in brokerage mergers, representing about $32 million of estimated annualized revenues in the first quarter of 2022. The recent acquisition marks the ninth acquisition in the second quarter of 2022. 
AJG’s merger and acquisition pipeline is quite strong, with about $250 million of revenues, associated with about 40 term sheets either agreed upon or being prepared.

Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. A solid capital position supports AJG in its growth initiatives and it thus remains focused on continuing its tuck-in mergers and acquisitions.

AJG remains focused on long-term growth strategies for delivering organic revenue improvement and pursuing strategic mergers and acquisitions. AJG is focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future. 

Price Performance

Shares of Arthur J. Gallagher have gained 16.5% in the past year against the industry’s decrease of 6.2%. The efforts to ramp up its growth profile and capital position should continue to drive the share price higher.

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Other Acquisitions in the Same Space

Given the insurance industry’s adequate capital level, players like Brown & Brown Inc. (BRO - Free Report) and Marsh & McLennan Companies, Inc. (MMC - Free Report) have been pursuing strategic mergers and acquisitions.

Brown & Brown’s subsidiary Brown & Brown Dealer Services has acquired all the assets of Profits Creation Corp. to consolidate its presence in the Southeast. BRO’s impressive growth is driven by organic and inorganic means across all segments. It intends to make consistent investments to boost 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.

Marsh & McLennan’s Marsh McLennan Agency acquired Maine-based Clark Insurance to boost its capabilities and more effectively cater to clients, colleagues and the community. Acquisitions are one of the core growth strategies of Marsh & McLennan, helping it to expand product offerings, benefit customers and strengthen its global presence. MMC spent $1.1 billion on buyouts in 2021. On the acquisition front, the insurance broker has been quite active this year as well by expending $24 million on buyouts in the first quarter of 2022.

A Stock to Consider

A better-ranked insurer from the same space is Ryan Specialty Group Holdings, Inc. (RYAN - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for RYAN’s  2022 and 2023 earnings has moved 3.4% and 4.3% north in the past 60 days and indicates a 13% and 19.3% year-over-year increase, respectively. Ryan Specialty delivered a four-quarter average earnings surprise of 19.7%.

Shares of BRO, MMC and RYAN have lost 8.6%, 10% and 38.7%, respectively, in the past year.

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