Arthur J. Gallagher & Co. (AJG Quick QuoteAJG - Free Report) recently acquired Southern Insurance Group, LLC. The buyout will help AJG consolidate its presence in Mississippi and Southeast United States.

Columbia, MS-based Southern Insurance Group provides commercial and personal property/casualty insurance coverages. The addition of Southern Insurance Group will thus boost the acquirer’s capabilities in the aforesaid operating region.

Arthur J. Gallagher has an impressive inorganic story with buyouts made in the Brokerage and Risk Management segments. This insurance broker acquired 25 entities in the first half of 2023 that contributed about $418 million to estimated annualized revenues. AJG has a strong merger and acquisition pipeline with about $300 million of revenues, associated with about 55 term sheets either agreed upon or being prepared, representing more than $700 million of annualized revenues.

A solid capital position supports AJG in its growth initiatives and it thus remains focused on continuing its tuck-in mergers and acquisitions. AJG continues to expect M&A capacity upward of $3 billion through the end of 2023 and another $3 billion in 2024 without using any equity.

This Zacks Rank #3 (Hold) insurance broker’s long-term growth strategies should help it deliver organic revenue improvement and pursue 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 21.2% year to date, outperforming the industry’s 13.3% increase. The efforts to ramp up its growth profile and capital position should continue to drive the share price higher.

Given the insurance industry’s adequate capital level, players like Marsh & McLennan Companies, Inc. (MMC Quick QuoteMMC - Free Report) pursue strategic mergers and acquisitions. Recently, Marsh, its business unit, inked a deal to purchase the entire outstanding share capital of the Australia-based specialist insurance broker Honan Insurance Group Pty Ltd. Management of Marsh believes that the inclusion of Honan’s well-established capabilities, specifically in the field of corporate risk and strata insurance, will enhance its specialist competence. This, in turn, will enable Marsh to better serve its client base across Australia and New Zealand.

Acquisitions form one of the core growth strategies of Marsh & McLennan. Buyouts, similar to the latest one, add strength to its capabilities, expand its services offerings and enable the company to enter new geographies as well as solidify its foothold across existing markets. An upgraded services suite is likely to lure more customers and contribute more to the revenues of MMC in the days ahead.

Stocks to Consider

Some top-ranked stocks from the same space are Erie Indemnity Company (ERIE Quick QuoteERIE - Free Report) and Brown & Brown, Inc. (BRO Quick QuoteBRO - Free Report) .

Erie Indemnity outpaced earnings estimates in two of the last four quarters and missed the mark twice, the average surprise being 2.05%. The Zacks Consensus Estimate for ERIE’s 2023 earnings and revenues suggests a rise of 32.9% and 12.5%, respectively, from the prior-year reported figures. The consensus mark for ERIE’s 2023 earnings has moved 5.4% north in the past 30 days. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brown & Brown’s earnings surpassed estimates in three of the trailing four quarters and missed the mark once, the average surprise being 3.98%. The Zacks Consensus Estimate for BRO’s 2023 earnings suggests 18% year-over-year growth, while the same for revenues indicates an improvement of 17.6%. The consensus mark for BRO’s 2023 earnings has moved 7.2% north in the past 30 days. It carries a Zacks Rank #2 (Buy).