Arthur J. Gallagher Buys Canada-Based SBW Employee Benefits

Arthur J. Gallagher & Co. (NYSE:AJG) recently acquired Halifax, Nova Scotia-based Sinclair Billard and Weld Ltd. and CJM Solutions + Inc., which do business under the name of SBW Employee Benefits. The details of the transaction have been kept under wraps.

SBW Employee Benefits, founded in 1997, offers financial advice to business owners, professionals, and their families. The company designs, administers, markets and manages comprehensive group insurance programs for businesses and associations across Atlantic Canada. It also offers consulting advice on employee assistance plans and wellness programs. With the combination of individual wealth planning, employee benefits and retirement planning, it offers an end-to-end solution to clients.

SBW Employee Benefits is a strategic fit for Arthur J. Gallagher. The client-focused approach and the expertise of SBW have made Arthur J. Gallagher’s Atlantic Canada capabilities unique and incomparable in the market.

The recent buyout is the twelfth for Arthur J. Gallagher in the ongoing quarter. A strong capital position along with solid operational performance should continue to back Arthur J. Gallagher in its inorganic efforts.

Given the insurance industry’s high capital level, companies are aggressively pursuing mergers and acquisitions. Arthur J. Gallagher’s inorganic pipeline remains strong with revenues of about $400 million. In the first nine months of 2019, the company completed 35 mergers with more than $330 million of annualized revenues. These acquisitions provide it with incremental capabilities and services that benefit clients in Australia, the UK, Europe and the United States. The company targets about $1.5 billion of mergers and acquisitions with free cash and debt.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 47% in the past two years, outperforming the industry’s increase of 40.8%. The company’s policy of ramping up growth and capital position should continue to drive share price higher.

Stocks to Consider

Some better-ranked stocks from the same space are Fanhua Incorporation (NASDAQ:FANH) , eHealth (NASDAQ:EHTH) and Erie Indemnity Company (NASDAQ:ERIE) . While Fanhua sports a Zacks Rank #1 (Strong Buy), Erie Indemnity and eHealth carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fanhua distributes insurance products and provides property and casualty insurance, life insurance and participating insurance products in China. The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 13.44%.

eHealth operates through two segments and provides services like private health insurance exchange in the United States and China to families, individuals and small businesses. The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 161.74%.

Erie Indemnity provides sales, underwriting and policy issuance services on behalf of Erie Insurance Exchange. The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 4.90%.

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