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Arthur J. Gallagher’s Buyout Adds Capabilities to Portfolio


Arthur J. Gallagher & Co. AJG has purchased Integrity Transportation Insurance Agency, LLC to solidify its foothold in the South Central region of the United States with regard to transportation business. However, financial details of the transaction have been kept under wraps.

Details of the Transaction

Houston, TX-based Integrity Transportation operates as a retail property/casualty broker, catering to Texas-based transportation clients, mainly long-haul truckers. The company’s coverage includes auto liability, cargo and general liability to name a few. Historically, the acquired entity has built a reputation for itself by providing highly innovative solutions to its clients, which have increased their business efficiency level. Post completion of the buyout, the company will continue to operate from its current office location.

The team at Integrity Transportation displays prowess in the transportation industry plus boasts a stellar client service delivery as well as a brilliant goodwill in the similar industry. The buyout will help Arthur J. Gallagher expand the transportation business and simultaneously, offer other ways to extend reverse-flow options coming in from Mexico.

The latest buyout will allow the insurance broker improve the risk management solutions, currently offered to the transportation industry. Arthur J. Gallagher’s solid expertise in this space will further get a boost, aiding the insurance broker to serve its clients more efficiently and effectively.

It is important to mention here that Arthur J. Gallagher’s prudent M&A activity bears testimony to its inorganic growth strategy. The insurance broker remains optimistic about its capability to attract acquisition partners in its typical small tuck-in size at fair prices.

Banking on such strategic endeavors, Arthur J. Gallagher’s top line has been improving over a significant period of time, witnessing a five-year CAGR (2012-2017) at 19.6%.

The company’s bottom line has nearly doubled over the last seven years, fueled by rising revenues as well as judicious buyouts and mergers. It has put the steam behind its acquisition activity in the retail employee benefits brokerage and wholesale brokerage areas. Arthur J. Gallagher’s merger and acquisition pipeline remains strong with about $300 million of revenues.

Zacks Rank and Share Price Movement

The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The insurance broker's shares have gained 6.5% year to date, outperforming the industry’s rise of 1.6%. We expect top-line increase, astute acquisitions and a sturdy capital position to drive the stock in the near term.

Notably, the company’s long-term earnings growth is pegged at 11.7%, better than the industry’s 11.4%.

Other Acquisitions in the Insurance Space

Following are a few noteworthy consolidations deserving special mention, one is AXA Group’s decision taken on Mar 5, 2018 to acquire 100% of XL Group Ltd XL for $15.3 billion and creating a leading global property and casualty (P&C) Commercial lines insurer based on gross written premiums.

Another such buyout refers to Fidelity National Financial, Inc.’s agreement FNF on Mar 19, 2018 to integrate Stewart Information Services Corporation STC into its portfolio for a $1.2- billion cash-stock deal. This transaction is expected to culminate in the first or second quarter of 2019, subject to closing conditions.

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