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Arthur J. Gallagher's Latest Buyout to Aid in Cross Selling

Arthur J. Gallagher & Co. AJG recently acquired Garrett-Stotz Company. However, the details of the transaction were not revealed.

Louisville, KY-based Garrett-Stotz Company was founded in 1931. It is a full-service agency, which provides commercial and and personal lines property/casualty and benefits. It specially focuses on areas like construction, surety, real estate and auto dealers.

The addition of Garrett-Stotz to Arthur J. Gallagher’s portfolio is a strategic fit as the buyout will expand the acquirer’s presence in Kentucky and Indiana. This apart, the acquisition will provide it with additional expertise in construction and surety, and new cross-selling opportunities.

The recent buyout is the fourth for Arthur J. Gallagher in the ongoing quarter. It made 17 buyouts in the year-ago quarter with estimated annualized revenues of $84.3 million. 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 has enhanced capabilities and diversified operations. The company’s revenues are geographically diversified with strong domestic and international operations. Given the insurance industry’s high capital level, companies are aggressively pursuing mergers and acquisitions. Arthur J. Gallagher’s inorganic pipeline remains strong with about $400 million in revenues.  The company targets about $1.5 billion of mergers and acquisitions with free cash and debt.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 41.4% in the past two years, outperforming the industry’s increase of 23.6%. The company’s policy of ramping up growth and capital position should continue to drive share price higher.



Stocks to Consider

Some better-ranked insurance stocks include eHealth EHTH, Willis Towers Watson WLTW and Brown & Brown BRO each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

eHealth operates through two segments and provides services like private health insurance exchange in the United States and China to families, individuals and small businesses. The company came up with average four-quarter positive surprise of 167.16%.

Willis Towers Watson operates as an advisory, broking, and solutions company worldwide. The company provides actuarial support, plan design, and administrative services. It came up with positive surprise in two of the four quarters, the average being 4.56%.

Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. It came up with average four-quarter positive surprise of 9.06%.

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