Arthur J. Gallagher (AJG) Expands in Australia With Buyout

Arthur J. Gallagher & Co. AJG has acquired Aviation Insurance Australia. The acquisition will help AJG expand its footprint in Australia.

Brisbane, Queensland-based Aviation Insurance Australia was formed in 1993. This specialist retail insurance broker provides services to aviation and aerospace clients across the country. Adding these entities will enhance the acquirer’s compelling aviation portfolio and consolidate its presence in the region. The buyout will also support cross-selling opportunities in Australia for this world-leading insurance broker.

AJG’s revenues are geographically diversified with strong domestic and international operations, with the latter contributing about one-third of revenues and spread across Australia, Bermuda, Canada, the Caribbean, New Zealand and the United Kingdom. The company expects international contribution to total revenues to increase, given the number and size of the non-U.S. acquisitions.

Arthur J. Gallagher boasts an impressive inorganic story. This Zacks Rank #3 (Hold) company has made 11 buyouts in the fourth quarter of 2022 so far while closing 19 new tuck-in brokerage mergers, representing about $107 million of estimated annualized revenues in the first nine months of 2022. AJG has a strong merger and acquisition pipeline with about $400 million of revenues, associated with about 50 term sheets either agreed upon or being prepared.

A solid capital position supports AJG in its growth initiatives and it thus remains focused on continuing its tuck-in mergers and acquisitions. The company expects M&A capacity at more than $4 billion through the end of 2023.

This insurance broker remains focused on long-term growth strategies for delivering organic revenue improvement and pursuing strategic mergers and acquisitions. AJG is focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future.  

Shares of Arthur J. Gallagher have gained 14.2% year to date, outperforming the industry’s 1.2% increase. Its efforts to ramp up its growth profile and capital position should continue to drive the share price higher.

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Given the insurance industry’s adequate capital level, players like Fidelity National Financial Inc. FNF, Brown & Brown, Inc. BRO and Marsh & McLennan Companies, Inc. MMC have been pursuing strategic mergers and acquisitions.

Fidelity National acquired TitlePoint from Black Knight, Inc. through its wholly-owned subsidiary, F&G Annuities & Life, Inc. This addition to FNF’s portfolio marks the acquirer’s focus on investment, expansion and integration of property data, images and search technology and strengthening the compelling portfolio.

FNF has a leading market share in the title insurance industry and is looking for strategic buyouts, which, in turn, should drive its operational results. FNF is focused on ensuring a balanced capital allocation strategy by making investments in title technology and other strategic initiatives to support innovation and organic growth for the business. FNF is likely to benefit from strong origination demand and continued rebound in commercial real estate activity. FNF’s shares have lost 26.6% year to date.

Brown & Brown’s subsidiary, Brown & Brown Dealer Services, acquired all assets of Finance Builders Inc. The addition of Finance Builders will boost Brown & Brown’s presence in Connecticut and Massachusetts.

Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. The company intends to make consistent investments to drive organic growth and margins. BRO’s solid earnings have allowed it to expand its capabilities, with the buyouts extending its geographic footprint. Brown & Brown’s shares have lost 18.2% year to date.

Marsh & McLennan’s subsidiary, Marsh McLennan Agency, acquired Bradley Insurance Agency. The acquisition will help the acquirer to expand insurance expertise in eastern Tennessee.

Acquisitions are part of the core growth strategies of the company. MMC has made numerous purchases within its different operating units, which have enabled it to enter geographical regions, expand within the existing ones, foray into new businesses, develop segments and specialize within its existing businesses. Marsh & McLennan’s shares have lost 0.2% year to date.

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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