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Arthur J. Gallagher (AJG) Boosts Capabilities With IBKB Buyout

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Arthur J. Gallagher & Co. (AJG - Free Report) recently acquired Insurance by Ken Brown. The buyout will help AJG consolidate its presence in parts of the United States.

Altamonte Springs, FL-based Insurance by Ken Brown, Inc. (“IBKB”) is a retail insurance broker. Insurance by Ken Brown has expertise in the construction and swimming pool industries and caters to clients across Florida and Southeast United States.

Arthur J. Gallagher has an impressive inorganic story with a number of buyouts in the Brokerage and Risk Management segments. This insurance broker made 10 acquisitions in the first quarter of 2023 that contributed about $69 million to estimated annualized revenues.

AJG has a strong merger and acquisition pipeline with about $300 million of revenues, associated with about 40 term sheets either agreed upon or being prepared. Revenue growth rates generally range from 5% to 20% for 2023 acquisitions.

A solid capital position supports AJG in its growth initiatives and it thus remains focused on continuing its tuck-in mergers and acquisitions. The company expects an M&A capacity of more than $3 billion through the end of 2023.

This Zacks Rank #3 (Hold) insurance broker is inclined toward 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.  

Shares of Arthur J. Gallagher have gained 2.5% year to date, outperforming the industry’s 1.5% increase. The efforts to ramp up its growth profile and capital position should continue to drive the share price higher.

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Given the insurance industry’s adequate capital level, players like Brown & Brown, Inc. (BRO - Free Report) pursue strategic mergers and acquisitions. Recently, this insurance broker inked a deal to buy Kentro Capital Limited. The acquisition, when it materializes, will boost Brown & Brown’s presence in parts of England.

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. Consistent operational results have been aiding Brown & Brown in generating solid cash flows for deployment in strategic initiatives.

Stocks to Consider

Some better-ranked insurers from the insurance industry are Erie Indemnity (ERIE - Free Report) and Ryan Specialty Holdings (RYAN - Free Report) .

Estimates for Erie Indemnity’s 2023 and 2024 earnings have moved 3.9% and 11.7% north, respectively, in the past 30 days. ERIE sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ERIE’s 2023 and 2024 earnings per share indicates a year-over-year increase of 26.1% and 13.6%, respectively. In the year-to-date period, ERIE has lost 12.2%.

The Zacks Consensus Estimate for Ryan Specialty Holdings’ 2023 and 2024 earnings per share indicates a year-over-year increase of 15.7% and 23.3%, respectively. In the year-to-date period, RYAN has gained 0.4%.

RYAN’s earnings surpassed estimates in two of the last four quarters, missed in one, and met estimates in one, the average beat being 2.67%. The stock carries a Zacks Rank #2.

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