Arthur J. Gallagher's Madison Deal Boosts Inorganic Growth - Analyst Blog

A generic image of many stacks of coins Credit: Shutterstock photo

Arthur J. Gallagher & Co.AJG entered second-quarter 2015 with the announcement that it will acquire California-based Madison Risk & Insurance Services. However, the company's share price has been trending downward post-announcement and has declined in the last two trading sessions due to broader market fundamentals. The terms of the transaction were not disclosed.

Retail insurance broker Madison provides the healthcare industry with property/casualty and risk management insurance and consulting services. The company is an expert in coverages for hospitals, individual and group physicians, physician assistants, health systems, nurse practitioners, and allied facilities and providers across the U.S.

Arthur J. Gallagher will highly benefit from the Madison acquisition as the company's Western Region businesses will be perfectly complemented by it. Madison's healthcare industry specialization along with sales-based culture, strong market relationships and focus on quality client service will further benefit the insurance broker by expanding its customer base and well as strengthening its footprint in the healthcare industry.

Arthur J. Gallagher has also been expanding its risk management segment which accounted for 14% of the revenues in 2014. Earlier this year, the company acquired Chicago-based NationAir Aviation Insurance as another endeavor in this respect.

Arthur J. Gallagher is well-known for its inorganic growth initiatives. The latest takeover marks the seventh one by the company so far in 2015. During 2014, the company made 60 acquisitions which generated annualized revenues of $761.2 million.

Moreover, the company's solid liquidity position as of Dec 31, 2014, with cash and cash equivalents of $314.4 million (up 5.5% year over year) and retained earnings of $676 million (up 13.3% year over year) cushions its inorganic growth initiatives.

Other Insurance Brokers Adopting the Inorganic Route

Earlier this month, Willis Group Holdings plc WSH announced the buyout of Carsa Consultores in its effort to widen and strengthen its presence in Mexico.

Last month, Brown & Brown of New York, Inc., - a subsidiary of Brown & Brown, Inc. BRO - acquired some of the assets of Spain Agency, Inc.

Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold).

A better-ranked stock from the insurance sector, AXIS Capital Holdings Ltd. AXS , sports a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

GALLAGHER ARTHU (AJG): Free Stock Analysis Report

WILLIS GP HLDGS (WSH): Free Stock Analysis Report

AXIS CAP HLDGS (AXS): Free Stock Analysis Report

BROWN & BROWN (BRO): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

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

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.