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Brown & Brown (BRO) Enhances Service Portfolio With Buyout

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Brown & Brown, Inc. (BRO - Free Report) recently completed its previously announced buyout of Servco Pacific Insurance operations in Hawaii and the Pacific Northwest. The transaction will enable Brown & Brown to expand and boost its brokerage services, which will likely help it to strengthen its position in the market.

Servco Pacific Inc. (Servco), the parent company of Servco Pacific Insurance, was established in 1919. The parent company created a base for its wholly owned insurance brokerage firm in Hawaii in 1971 and later extended its operations to the Pacific Northwest in 2010. Servco Pacific operates as multi-line insurance brokerage firm, offering a wide range of insurance solutions comprising commercial plus personal property & casualty and employee benefits to name a few.  

The team at Servco Pacific remains committed to the “Expert Model” approach wherein the members are all experts in the respective industries that they serve. Boasting an annual turnover of $24 million, the acquired company is the second largest insurance brokerage firm in Hawaii and the largest marine insurance broker in the Pacific Northwest region.

On completion of the consolidation, the Hawaii operations will represent Brown & Brown’s primary retail presence in that zone and the Pacific Northwest operations will come together with the insurance broker’s already existing office in Seattle. The entire operations team at Servco Pacific will report to John Esposito, regional president, Brown & Brown.

Brown & Brown and Servco share a common objective of improving its respective businesses into becoming a market leader, apart from creating a positive culture that encourages the team members. The buyout will help the acquirer carry on the success achieved by its Hawaiian operations team along with enhancing its operational expertise in the Pacific Northwest.

Servco Pacific is likely to benefit from Brown & Brown’s resources, experience and values as the latter can offer more support that will help the former better serve its clients through superior products and services.

The latest integration will not only strengthen the buyer’s operations in the aforementioned regions but also aid in improving organic growth and margin expansion. Moreover, the company’s wholesale brokerage segment is expected to gain traction from this transaction in terms of boosting its product and service portfolio.

The above-mentioned inorganic strategies have assisted the company to fuel growth as well as expand its scope of operations. Also, these tactical initiatives have bolstered Brown & Brown to increase its commissions and fees, which in turn drove revenue growth.

Zacks Rank and Share Price Movement

Currently, Brown & Brown holds a Zacks Rank #2 (Buy). Shares of the company have gained 9.4% year to date, outperforming the industry’s 3.7% rise. We expect the company’s sustained operational performance, higher commissions and fees plus a solid capital position to push the stock higher in the near term.



 

Other Acquisitions in the Insurance Space

We have observed insurers adopting the inorganic route to brace portfolio. The insurance industry is drawing attention of late with a spate of acquisitions on the back of its available capital resource, which remains at an all-time high.

Recently, Alleghany Capital Corporation, which is a wholly-owned subsidiary of Alleghany Corporation (Y - Free Report) , informed that its unit Jazwares, LLC has purchased Russ Berrie and Applause brands. Also, Arthur J. Gallagher & Co. (AJG - Free Report) recently purchased Thomas Costello Insurance Agency, Inc. of late.

In April 2018, White Mountains Insurance Group, Ltd. (WTM - Free Report) inked a deal to buy a majority equity stake in NSM Insurance.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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