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Arthur J. Gallagher (AJG) Expands in Central LA With Buyout

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Arthur J. Gallagher & Co. (AJG - Free Report) has acquired Watkins Insurance & Benefits, LLC, doing business as Watkins Group — Insurance & Benefits Specialists. The terms of the transaction have been kept under wraps.

Established in 2008, Alexandria, LA-based Watkins Group — Insurance & Benefits Specialists offers employee benefit solutions for corporations and individuals, and Medicare coverage solutions. It caters to its clients throughout Central Louisiana. It provides a full range of brokerage services for employee benefits.

Adding Watkins Group — Insurance & Benefits Specialists to Arthur J. Gallagher’s portfolio will strengthen its presence in the Central Louisiana marketplace and provide the brokerage insurer with growth opportunities.

Inorganic Growth Story

Arthur J. Gallagher boasts an impressive inorganic story. In the first half of 2022, this Zacks Rank #3 (Hold) insurance broker completed eight tuck-in brokerage mergers, representing $82.3 million of estimated annualized revenues. The recent acquisition marks the sixth acquisition in the third quarter of 2022. AJG’s merger and acquisition pipeline is quite strong, with about $350 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. 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, which should help it post sturdy numbers in the future. 

Price Performance

Shares of Arthur J. Gallagher have gained 32.9% in the past year, outperforming the industry’s growth of 8.1%. The company’s efforts to ramp up its growth profile and capital position should continue to drive the share price.

 

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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 completed the acquisition of Global Risk Partners Limited in July. 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.

In July, Marsh & McLennan Companies, Inc.’s agency unit Marsh McLennan Agency acquired CS Insurance Strategies, Inc. to strengthen MMC’s Risk and Insurance Services segment, which is operated through Marsh and Guy Carpenter, and boost the coverage span of Marsh McLennan Agency, which is a subsidiary of the leading insurance brokering firm Marsh. Acquisition is one of the core growth strategies of Marsh & McLennan, helping it expand product offerings, benefit customers and strengthen its global presence.

Stock to Consider

A better-ranked insurer from the insurance industry is American Financial Group, Inc. (AFG - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 3.1% and 3.3% north, respectively, in the past 30 days.

Shares of BRO and MMC have gained 14.5% and 9%, respectively, while AFG has lost 2.3% in the past year.

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