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Arthur J. Gallagher Buys Kirksey, Strengthens Crop Insurance

Arthur J. Gallagher & Co. AJG acquired The Kirksey Agency, Inc. The details of the transaction were kept under wraps.

West Monroe, LA-based Kirksey was founded in 1980. It operates as an insurance agency, which offers personal and commercial lines of insurance. It caters to the customers with various insurance product lines, including home, general liability, commercial auto, mobile home, renters, personal liability, medical malpractice, life, and health across the South-Central United States. Kirksey also offers crop insurance for farmers.

Rationale Behind the Deal

Kirksey is expected to be a strategic fit for Arthur J. Gallagher. This is because the buyout will strengthen and boost the acquirer’s agricultural capabilities. Also, it is likely to reinforce and enhance its client offerings across the Mid-South region.

Notably, the latest transaction marks Arthur J. Gallagher’s second buyout in the third quarter of 2020. A strong capital position, supported by sustained solid operational performance should continue to back its inorganic efforts.

Inorganic Growth Story

Arthur J. Gallagher’s revenues are geographically diversified, with strong domestic and international operations. A number of acquisitions have boosted its capabilities and diversified operations. Its inorganic pipeline remains strong, with revenues of about $250 million associated with 30 term sheets either agreed upon or being prepared.

In 2019, the company closed 49 mergers with more than $468 million of annualized revenues. 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 Brown & Brown Lone Star Insurance Services, Inc. acquired considerably all Brookstone Insurance Group, LLC’s assets.

Price Performance

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 15.9% in a year, outperforming the industry’s growth of 6.1%. Efforts to ramp up its growth profile and capital position should help shares bounce back.

 

 

Stocks to Consider

Some better-ranked companies in the insurance industry are eHealth EHTH and Donegal Group Incorporation DGICA, each sporting a Zacks Rank #1 (Strong Buy) at present. 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 being 82.02%.

Donegal surpassed estimates in each of the last four quarters, with the average being 86.44%.

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