Arthur J. Gallagher Boosts Affinity Business with New Buyout
Arthur J. Gallagher & Co. AJG recently acquired National Ethics Bureau, Inc. to enhance and extend its U.S. affinity operations. The transaction amount remained undisclosed.
National Ethics Bureau, which operates as the National Ethics Association (“NEA”), was established in 2001. The acquired company offers insurance products and services to members of the association across the United States. NEA primarily focuses on errors and omissions (E&O) insurance coverage, which in turn, meets the needs of insurance agents, investment advisors, real estate agents, tax prepares and bookkeepers. In addition, the acquired company provides members with a wide range of other association-sponsored products and services.
We believe that the buyout would further boost the already robust inorganic growth portfolio of the acquirer. Post takeover, NEA will continue to operate from its current location.
We expect NEA’s in-depth expertise in the E&O insurance program and superior quality products and services to be highly value accretive to Arthur J. Gallagher’s client portfolio. Furthermore, NEA’s robust membership and insurance carrier relationships along with strong foothold in Southern California will complement the acquirer’s insurance brokerage services.
The Zacks Rank #3 (Hold) insurance broker is known for improving its growth profile through prudent acquisitions. Most of the buyouts by this company are within the brokerage segment. This apart, Arthur J. Gallagher has increased purchases in the retail employee benefits brokerage and wholesale brokerage sectors. The brokerage service provider intends to pursue smaller tuck-in mergers in 2017.
Notably, shares of Arthur J. Gallagher gained 25.9% year to date, outperforming the Zacks categorized Insurance Broker industry’s growth of about 23.8%. Substantial improvement, both in the bottom line and top line, along with a robust liquidity position backed by strong cash flow generation contributed to the outperformance. Further, a strong capital position has not only helped increased the company’s shareholder value but also enabled the insurance broker to invest in prudent initiatives, which in turn, has accelerated growth.
Stocks to Consider
Some better-ranked stocks from the insurance industry include Alleghany Corporation Y, NMI Holdings, Inc. NMIH and Arch Capital Group Ltd. ACGL. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation deals with P&C reinsurance and insurance businesses in the United States. and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 20.52%.
NMI Holdings offers private mortgage guaranty insurance services in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 62.80%.
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarters with an average beat of 9.27%.
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