Arthur J. Gallagher & Co. AJG recently acquired AWIS Group, a wholesale insurance broker. The details of the transaction were however kept under wraps.
Founded in 2005, San Diego, CA-based AWIS Group provides a broad range of commercial coverages as well as high-net-worth personal lines, primarily through California-based insurance agencies.
The leading insurance broker has access to more than 100 markets and the capability to write on both Admitted and Non-Admitted paper for all lines of business. Its departments include, Workers' Compensation, Property, Casualty, Professional Liability and High Net Worth Personal Lines.
Risk Placement Services, Inc. (RPS), a division of Arthur J. Gallagher, is one of the nation’s largest specialty wholesale insurance brokerage firms.
With the acquisition of AWIS, RPS’s production talent will be expanded and its presence will be established in the San Diego market. Also, this transaction will strengthen RPS’ workers compensation expertise.
Notably, the latest transaction marks Arthur J. Gallagher’s third buyout in the fourth quarter of 2020. Its robust capital position along with sustained solid operational performance should continue to back its inorganic efforts.
Inorganic Growth Story
Acquisitions enable this Zacks Rank #2 (Buy) insurance broker to expand into desirable geographic locations, further extend its presence in retail and wholesale insurance and reinsurance brokerage services markets and increase the volume of general services currently provided. Its inorganic pipeline remains strong, with revenues of about $350 million associated with 40 term sheets either agreed upon or being prepared.
In the first nine months of 2020, the company completed 17 mergers, representing about $151.2 million of annualized revenues. Revenue growth rates generally ranged from 2.5% to 15% for 2020 acquisitions. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe and the United States. The company remains focused on its long-term growth strategies of delivering organic revenue growth and pursuing mergers and acquisitions.
Another Acquisition in the Same Space
There have been a host of acquisitions in the insurance space of late, given the significant capital available. Recently, Brown & Brown’s BRO subsidiary bought CoverHound and its wholly owned subsidiary, CyberPolicy.
Price Performance
Shares of the insurance broker have gained 22.6% in a year, outperforming the industry’s growth of 5.4%. Efforts to ramp up the company’s growth profile and capital position should help shares bounce back.
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Other Stocks to Consider
Some other top-ranked companies in the insurance industry are eHealth EHTH and First American Financial FAF, each sporting a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
eHealth surpassed estimates in each of the last four quarters, with the average being 83.27%.
First American surpassed estimates in three of the last four quarters and missed in one, with the average being 16.83%.
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First American Financial Corporation (FAF): Free Stock Analysis Report
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