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Arthur J. Gallagher Buys H.R. Keller, Ups Brokerage Services

Zacks

Arthur J. Gallagher & Co. AJG recently acquired H.R. Keller & Co., Inc. to bolster its insurance brokerage operations and risk management services. The company also intends to extend its presence in New York and the Northeastern region of the United States. However, financial details of the transaction were kept under wraps.

Details of the Transaction

Established in 1962, Buffalo NY-based H.R. Keller operates as a surplus lines broker and program administrator, catering to clients mainly in New York and the surrounding states. The company, offering personal and commercial coverage to name a few, has built a reputation for itself over a significant period of time. After the completion of the buyout, the company will continue to operate from its current office location.

The latest acquisition is anticipated to strengthen the already robust inorganic growth portfolio of the acquirer. The team at H.R. Keller displays solid efforts in catering to its clients’ specific needs and also boasts its proven expertise in the chosen field of operations. Moreover, the acquired company is well equipped with sturdy market relationships.

Notably, H.R. Keller made it easier for its clients to do business in a simpler fashion while building a lasting and a profitable alliance with other players in the market. The buyout will help Arthur J. Gallagher make suitable enhancements to its service portfolio that will aid the company to serve its clients much better and more efficiently. Further, this will enable Arthur J. Gallagher’s risk placement services to extend its foothold in upstate New York and the Northeastern region of the United States.

Arthur J. Gallagher’s prudent acquisitions bear testimony to its inorganic growth strategy. The insurance broker remains optimistic about its capability to attract buyout partners in its typical small tuck-in size at fair prices.

Over the past few years, Arthur J. Gallagher’s impressive growth has been primarily fueled by organic sales as well as judicious buyouts and mergers. The company has been focusing on its M&A activity in the retail employee benefits brokerage as well as the wholesale brokerage areas. Its consolidation pipeline remains firm with about $400 million revenues. Additionally, driven by the number and size of non-U.S. buyouts, international contribution to total revenues is expected to improve in the long run.

Zacks Rank and Share Price Movement

Arthur J. Gallagher carries a Zacks Rank #3 (Hold). Shares of the company have rallied 15.7% in a year’s time, outperforming the industry’s rise of 8.2%. We expect top-line growth, discreet acquisitions and a robust capital position to drive the shares higher in the near term.

Other Acquisitions in the Insurance Space

We have observed insurers adopting the inorganic route to strengthen portfolio for a while now. The insurance industry has been hitting headlines recently with consecutive acquisitions, courtesy of its available capital resource, which remains at an all-time high.

Recently, The Navigators Group, Inc. NAVG closed the buyout of Bracht, Deckers & Mackelbert NV (BDM) as well as its affiliated insurance company, Assurances Continentales – Continentale Verzekeringen NV (ASCO). Also, Brown & Brown, Inc. BRO completed the transaction of Servco Pacific Insurance operations in Hawaii and the Pacific Northwest.

Further, Alleghany Capital Corporation, a wholly-owned subsidiary of Alleghany Corporation Y, announced that its unit Jazwares, LLC has purchased Russ Berrie and Applause brands.


You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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