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Arthur J. Gallagher & Co. (AJG – Free Report) recently acquired Alpha Surety & Insurance Brokerage, LLC. The terms of the transaction have been kept secret.
Founded in 2002, Alpha Surety & Insurance Brokerage, based in Little Rock, AR, focuses on the sale of direct and wholesale commercial surety bonds in the industrial sectors. These include money transmitters, cryptocurrency, professional employers’ organizations, debt managers, mortgage and financial lenders, fundraisers, and others. Its capabilities range from providing all types of single bonding to developing national bonding programs for specific industries.
This recent transaction is a strategic adjustment for Arthur J. Gallagher as it should broaden and strengthen the expertise of the acquirer market as well as product offerings in the surety field.
The latest transaction marks the insurance broker’s sixth buyout in the third quarter of 2021.
History of inorganic growth
Acquisitions allow Arthur J. Gallagher to expand into desirable geographic locations, expand its presence in the retail and wholesale insurance and reinsurance brokerage services markets, and increase corporate service volume that it currently provides. Its inorganic pipeline remains strong with approximately $ 300 million in annualized revenue associated with 40 termsheets signed or in preparation.
Arthur J. Gallagher currently wears a Zacks Rank # 3 (Hold).
Arthur J. Gallagher’s strong capital position supports his growth initiatives. The company estimates more than $ 2.5 billion in mergers and acquisitions, including $ 1 billion in cash, approximately $ 650 million in net cash generation in the second half of 2021, and $ 600-700 million in capacity. borrowing.
So far this year, it has made 22 acquisitions. Revenue growth rates have typically been 5-15% for acquisitions from 2021 to date. The buyouts provide the company with additional capabilities and services to support customers in Australia, UK, Europe and the US. The company has focused more on its long-term growth strategies of generating organic revenue growth and pursuing mergers and acquisitions.
Other acquisitions in the same space
There have been a multitude of acquisitions in the insurance industry in recent times, given its significant availability of capital. Brown & Brown, Inc.‘s (BOYFRIEND – Free Report) subsidiary Bridge Specialty Group, LLC has acquired substantially all of the assets of Gremesco of New Jersey, LLC. Marsh McLennan‘s (MMC – Free report) The Marsh McLennan agency has acquired Vaaler Insurance.
Price return
Arthur J. Gallagher shares have gained 40% in one year, surpassing the industry’s 13.7% increase. Efforts to accelerate the company’s growth profile and capital position should help the stock maintain its price momentum.
Image source: Zacks Investment Research
A stock that deserves a look
A higher ranked stock of the same space is Aon plc (AON – Free Report), carrying a Zacks Rank # 2 (Buy). You can see the full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Aon has beaten estimates in each of the past four quarters, with an average surprise of 10.03%.
