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Arthur J. Gallagher (AJG) Boosts Surety Market With Viking Bond

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Arthur J. Gallagher & Co. (AJG - Free Report) recently acquired Viking Bond Service, Inc. The terms of the transaction have not been revealed yet.

Phoenix, AZ-based, Viking Bond Service, was formed in 2002. Viking Bond Service is a nationwide Surety Bond Agency that manages surety bonds. The company provides bonding through many different sureties.

Viking Bond Service has specialists in all surety bond classifications and it provides competitive rates and top-notch service for its clients.

The addition of this entity to the acquirer’s portfolio is a strategic fit as it will enhance its existing surety offerings and boost its expertise in the surety market.

Inorganic Growth Story

Arthur J. Gallagher boasts an impressive inorganic story. This Zacks Rank #3 (Hold) insurance broker acquired 36 entities in 2022 that contributed about $107 million to estimated annualized revenues of $244 million. AJG has a strong merger and acquisition pipeline with about $300 million of revenues, associated with about 45 term sheets either agreed upon or being prepared. The recent acquisition marks the 10th acquisition in the first quarter of 2023.

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. The insurer expects an M&A capacity of more than $3 billion through the end of 2023.

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 12.1% in the past year against the industry’s decrease of 3%. The insurer’s efforts to ramp up its growth profile and capital position should continue to drive the share price.

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Another Acquisition in the Same Space

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

Marsh & McLennan’s business Mercer recently acquired a Human Resources technology advisory firm, Leapgen. The acquisition is expected to enrich Mercer’s solutions for Workforce and HR Transformation, improve technology decision-making and enable providing better employee experience outcomes.

Acquisitions are part of the core growth strategies of the company. MMC made numerous purchases within its different operating units, which have enabled it to enter geographical regions, expand within the existing ones, foray into new businesses, develop segments and specialize within its existing businesses. Marsh & McLennan’s shares have gained 6.5% in the past year.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Axis Capital Holdings Limited (AXS - Free Report) and Everest Re Group, Ltd. , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axis Capital beat estimates in three of the last four quarters and missed in one, the average being 5.70%. The Zacks Consensus Estimate for 2023 and 2024 has moved 5% and 0.3%, north, respectively, in the past 60 days.

The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.50 and $8.50, indicating a year-over-year increase of 29% and 13.3%, respectively. In the past year, AXS has lost 6.6%.

The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $45.63 and $53.02, indicating a year-over-year increase of 68.5% and 16.1%, respectively. In the past year, RE has gained 19%.

RE beat estimates in each of the last four quarters, the average being 18.41%.

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