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Arthur J. Gallagher Expands With Walsdorf Agency Buyout

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Arthur J. Gallagher & Co. (AJG - Free Report) has acquired Walsdorf Agency, Inc. The details of the transaction have been kept under wraps.

Huntington, NY-based Walsdorf Agency was established in 1926. The company is a third generation, family owned commercial and personal lines insurance agency. Its clients range from individuals with personal insurance needs to small and large businesses with broader needs. It offers knowledge and expertise and has a solid real estate niche expertise. It focuses on protecting and serving its clients.

The addition of Walsdorf Agency to Arthur J. Gallagher’s portfolio will aid the latter in further expansion and boost its growing Real Estate Practice.

The recent buyout is the first for Arthur J. Gallagher in the first quarter of 2020. A strong capital position along with solid operational performance should continue to back Arthur J. Gallagher in its inorganic efforts.

Given the insurance industry’s high capital level, companies are aggressively pursuing mergers and acquisitions. Arthur J. Gallagher’s inorganic pipeline remains strong with revenues of about $400 million. In the first nine months of 2019, the company completed 35 mergers with more than $330 million of annualized revenues. These acquisitions provide it with incremental capabilities and services that benefit clients in Australia, the UK, Europe and the United States. The company targets about $1.5 billion of mergers and acquisitions with free cash and debt.

Recently, there have been a number of acquisitions in the insurance brokerage industry, given the significant capital available. Brown & Brown’s (BRO - Free Report) unit Brown & Brown of South Carolina, Inc. recently acquired the assets of Insurance Management Group, Inc. (IMG).

Shares of this Zacks Rank #4 (Sell) insurance broker have gained 51.1% in the past two years, outperforming the industry’s increase of 43.1%. The company’s policy of ramping up growth and capital position should continue to drive share price higher.

Stocks to Consider

Some better-ranked stocks from the same space are Fanhua Incorporation (FANH - Free Report) and Aon plc (AON - Free Report) . While Fanhua sports a Zacks Rank #1 (Strong Buy), Aon carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fanhua distributes insurance products and provides property and casualty insurance, life insurance and participating insurance products in China. The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 13.44%.

Aon offers advisory and solutions based on risk, retirement, and health to clients and provides commercial risk solutions, including retail brokerage, cyber, and global risk consulting solutions, as well as acts as a captive insurance provider.  The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 0.57%.

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