American International Group, Inc. (AIG - Free Report) has announced to acquire Glatfelter Insurance Group (Glatfelter), a full-service broker and an insurance company, providing services for specialty programs and retail operations.
Post acquisition, Glatfelter — the program manager and a specialty insurance broker — is likely to expand the purchaser’s General Insurance business (accounting for nearly 60% of the company’s revenues during the second quarter of 2018), bringing along high-quality program underwriting capabilities. Meanwhile, terms of the transaction were kept under wraps.
The company’s relationship with Glatfelter dates back around 40 years. The deal echoes the growing consolidation trend in the specialty brokerage space.
Recently, the company’s General Insurance segment acquired Validus Holdings, Ltd., a leading provider of reinsurance, primary insurance and asset management services. The transaction is expected to strengthen the buyer’s global General Insurance business by extending its current product portfolio through additional distribution channels as well as advancing the tools available to enhance its underwriting capability.
General Insurance continues to execute its other strategic priorities such as improving core performance by refining the portfolio, adding highly respected industry executives to its leadership team, strengthening the underwriting organization by recruiting seasoned underwriters and continuing to build end-to-end business units in North America as well as internationally. To this end, it broadened its European Casualty excess of loss program to cover the entire international business and entered into a new U.S. terrorism facility that reduced net exposures for its in-force commercial property policies.
Over the last three quarters, General Insurance segment has made a meaningful progress in line with its strategic priorities that will improve its core financial performance going into 2019.
American International has been struggling with soft business and successive revenue declines since 2013, persistent through the first half of 2018 as well. The company languished under its own weight with numerous business operations creating little or no synergy. This bearish scenario dented the company’s profitability. Management therefore took to massive amount of divestitures, selling a number of consolidating businesses to slash costs.
Year to date, the stock has lost 8.2%, compared with the industry’s decline of 4.4%.
The company’s CEO Brian Duperreault, appointed last year, has made a significant shift in its capital utilization strategy with a view to turn the stock around and achieve greater profitability. Management now expects to utilize capital for possible buyouts in the international markets, thereby boosting the company’s personal and life lines segments plus investing in the domestic middle market as opposed to its hitherto usage of capital resource for share repurchases. We will thus be little surprised to hear about more deals from the company going forward.
Hence, a lower amount of share buyback will somewhat be less accretive to the company’s bottom line.
American International carries a Zacks Rank #3 (Hold).
Investors interested in property and casualty industry can check out some better-ranked stocks like Arch Capital Group Ltd. (ACGL - Free Report) , American Financial Group Inc. (AFG - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) , each carrying a Zacks Rank # 2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arch Capital provides property, casualty and mortgage insurance and reinsurance products worldwide. It delivered a positive surprise of 13.46% in the earlier reported quarter.
American Financial Group provides property and casualty insurance products in the United States. Last reported quarter, it pulled off an earnings surprise of 8.51%.
Berkshire Hathaway engages in insurance, freight rail transportation and utility businesses. It came up with a skyrocketing 22.91% beat in the previously reported quarter .
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>