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

Arthur J. Gallagher & Co.’s AJG U.S. wholesale brokerage, binding authority and programs division, Risk Placement Services, Inc. (RPS) has acquired Evergreen Insurance Managers Inc. The terms of the transaction have been kept under wraps.

Established in 2006, Hillsboro, OR-based Evergreen Insurance Managers is a full-service multiline Managing General Agent with wholesale brokerage facilities. It provides commercial insurance solutions for commercial accounts for a wide variety of industries.  It provides insurance products that provide quality protection with value pricing.

Evergreen Insurance Managers partners with a limited number of carriers within each product segment in order to maximize service and premium potential for Independent Retail Agency partners.

The addition of Evergreen Insurance Managers to Arthur J. Gallagher’s portfolio will strengthen RPS' presence in the greater Portland market. This acquisition will provide the brokerage insurer with new growth opportunities in the Pacific Northwest.

Inorganic Growth Story

Arthur J. Gallagher boasts an impressive inorganic story. In the first half of 2022, this Zacks Rank #3 (Hold) insurance broker completed eight new tuck-in brokerage mergers, representing about $82.3 million of estimated annualized revenues. The recent acquisition marks the fifth acquisition in the third quarter of 2022.  AJG’s merger and acquisition pipeline is quite strong, with about $350 million of revenues, associated with about 40 term sheets either agreed upon or being prepared.

Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. A solid capital position supports AJG in its growth initiatives and it thus remains focused on continuing its tuck-in mergers and acquisitions.

AJG 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. 

Price Performance

Shares of Arthur J. Gallagher have gained 28.4% in the past year, outperforming the industry’s increase of 9.4%. The efforts to ramp up its growth profile and capital position should continue to drive the share price higher.

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Other Acquisitions in the Same Space

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

Brown & Brown completed the acquisition of Global Risk Partners Limited in July. BRO’s impressive growth is driven by organic and inorganic means across all segments. It intends to make consistent investments to boost organic growth and margin expansion. Its solid earnings have allowed the company to expand its capabilities, with the buyouts extending the company’s geographic footprint.

In July, Marsh & McLennan Companies, Inc.’s agency unit Marsh McLennan Agency acquired CS Insurance Strategies, Inc. to strengthen MMC’s Risk and Insurance Services segment, which is operated through Marsh and Guy Carpenter, and boost the coverage span of Marsh McLennan Agency, which is a subsidiary of the leading insurance brokering firm Marsh. Acquisitions are one of the core growth strategies of Marsh & McLennan, helping it to expand product offerings, benefit customers and strengthen its global presence.

Stock to Consider

A better-ranked insurer from the insurance industry is American Financial Group, Inc. AFG, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for AFG’s  2023 earnings has moved 8.7% north in the past seven days and indicates a 2.1% year-over-year increase. American Financial surpassed estimates in three of the last four quarters, with the average surprise being 37.09%.

Shares of BRO and MMC have gained 18.3% and 10.2%, respectively, while AFG has lost 5.6% in the past year.

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