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Arthur J. Gallagher (AJG) Acquires Insurance Broker CMS

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Arthur J. Gallagher & Co. AJG has acquired full-service wholesale insurance broker CMS, LLC. The details of the transaction have been kept under wraps.

CMS offers brokerage, consulting and risk management services across the United States. It offers coverages for construction, importing, wholesaling/distributing, manufacturing and real estate businesses, as well as personal lines.

The addition of CMS to Arthur J. Gallagher’s portfolio will provide the acquirer solid market presence in construction and real estate. This buyout will also enable Arthur Gallagher’s  subsidiary company, Risk Placement Services, Inc. (RPS) to deliver standard market coverage solutions to smaller agents.

The recent buyout is the seventh 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.

Arthur J. Gallagher has grown meaningfully over the years through a number of strategic acquisitions that have enhanced capabilities and diversified operations. Its inorganic pipeline remains strong with revenues of about $250 million, associated with 50 term sheets either agreed upon or being prepared. In 2019, the company completed 49 mergers with more than $468 million of annualized revenues. These acquisitions provide  the company with incremental capabilities and services that benefit clients in Australia, the UK, Europe and the United States.

Recently, there have been a number of acquisitions in the insurance brokerage industry, given the significant capital available. Brown & Brown’s BRO subsidiary, Hull & Company, LLC acquired the assets of All Risk General Agency, Inc., Select General Agency, LLC, TARGA Investment Corporation, TARGA Premium Finance Company, Inc., and Texas All Risk General Agency, Inc., collectively known as Texas All Risk.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 30% in the past year, outperforming the industry’s increase of 21.2%. 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 eHealth, Inc. EHTH and Aon plc AON. While eHealth sports a Zacks Rank #1 (Strong Buy), Aon plc carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth surpassed estimates in each of the last four quarters, with the average positive surprise being 182.77%.

Aon surpassed estimates in three of the last four quarters, with the average positive surprise being 0.62%.

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