Arthur J. Gallagher Buys Cleary Benefits, Spurs Portfolio

Arthur J. Gallagher & Co. AJG recently acquired Cleary Benefits Group Inc. The terms of the transaction have not been revealed yet.

Danbury, CT-based Cleary Benefits Group was founded in 1998. It is an independent, privately owned, strategic benefits advisory company. The company provides all-inclusive health & welfare benefits consulting services and delivers senior-level expertise, entrepreneurial thinking and guaranteed performance. It primarily serves mid-size to large commercial clients.

The acquisition of Cleary Benefits will further strengthen Arthur J. Gallagher's benefits consulting capabilities in the northeast region.

Arthur J. Gallagher has an impressive inorganic story with buyouts in the Brokerage and Risk Management segments. This Zacks Rank #3 (Hold) insurance broker acquired 12 entities totaling $69.2 million of estimated annualized revenues in the first quarter of 2024. The company is growing through mergers and acquisitions, most of which are within its Brokerage segment. AJG has a solid merger and acquisition pipeline with about 50 term sheets either agreed upon or being prepared, representing more than $350 million of annualized revenues.

A solid capital position ensuring continuous cash inflow supports AJG in its growth initiatives. It remains focused on continuing its tuck-in mergers and acquisitions. The insurer continues to expect an M&A capacity of $3.5 billion in 2024 and another $4 billion in 2025 without using any equity.

Arthur J. Gallagher's long-term growth strategies should help it deliver organic revenue improvement and pursue 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 22.7% over the past year compared with the industry's 9.2% growth. Solid performance of the Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment should continue to drive share price higher.

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Acquisitions by Another Industry Player

Marsh & McLennan Companies, Inc. MMC through Marsh McLennan Agency, a subsidiary of its business, Marsh, bought Wayzata, MN-based AmeriStar Agency, Inc. This acquisition will help Marsh McLennan Agency by expanding its client base and service offerings.

By incorporating the independent agency, Marsh McLennan Agency gains access to high-net-worth individuals and commercial clients, enhancing its ability to provide tailored risk management solutions and deepen its expertise. Additionally, integrating all of AmeriStar's experienced employees and established operations will likely strengthen the acquirer's market position.

Stocks to Consider

Some better-ranked stocks from the brokerage insurance industry are Brown and Brown, Inc. BRO and NMI Holdings Inc, each carrying a Zacks Rank #2 (Buy) at present.

Brown and Brown has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 11.90%. In the past year, shares of BRO have jumped 31.9%. The Zacks Consensus Estimate for BRO's 2024 and 2025 earnings implies year-over-year growth of 28.47% and 8.03%, respectively.

NMI Holdings' earnings surpassed estimates in each of the last four quarters, the average surprise being 8.60%. In the past year, shares of NMIH have jumped 32%. The Zacks Consensus Estimate for NMIH's 2024 and 2025 revenues implies year-over-year growth of 10.6% and 7.6%, respectively.

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