Arthur J. Gallagher Buys Dicentra Pension, Boosts Portfolio

Arthur J. Gallagher & Co. (NYSE:AJG) recently acquired Dicentra Pension Services, LLC. to boost its employee benefits consulting and brokerage operations with regard to pension consulting and administration. The buyout is likely to help strengthen the insurance broker’s footprint in the Northern region of the United States. However, financial details of the transaction were kept under wraps.

Details of the Transaction

Established in 2016, Dicentra Pension provides pension plan de-risking, actuarial consulting, administration and plan termination services. The company caters to small and mid-sized clients throughout the United States. Banking on the aforementioned services, the firm has been able to build a reputation for itself within a short span of time. After the completion of the acquisition, the company will shift to Arthur J. Gallagher’s office in Minneapolis.

Apart from solidifying the already strong inorganic growth profile of the acquirer, the latest transaction is anticipated to fortify its presence in the Northern region of the United States pertaining to employee benefits brokerage and consulting services, primarily in the highly specialized area of pension plan de-risking. Hence, the integration is expected to add capabilities to the insurance broker’s service portfolio.

Arthur J. Gallagher’s discerning M&A activity stands testament to its inorganic growth strategy. The company remains optimistic about its ability to woo acquisition 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 cushioned by organic sales as well as judicious buyouts and mergers. The company has been cautiously eyeing its consolidation pipeline in the retail employee benefits brokerage and wholesale brokerage areas, which remains strong with about $400 million of revenues. Further, driven by the number and size of non-U.S. buyouts, international contribution to the company’s top line is likely to improve.

Zacks Rank and Share Price Movement

Arthur J. Gallagher carries a Zacks Rank #3 (Hold). Shares of the company have rallied 16.8% in a year’s time, outperforming the industry’s rise of 7.4%. We expect top-line growth, astute acquisitions and a robust capital position to drive the shares higher in the near term.

Other Acquisitions in the Insurance Space

We have noticed insurers adopting the inorganic avenue to reinforce portfolio for a while now. The insurance industry has been attracting attention of late with a host of acquisitions on the back of its available capital resource, remaining at an all-time high.

Recently, The Navigators Group, Inc. (NASDAQ: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. (NYSE:BRO) purchased essentially all the assets of C & C Risk Services, LLC.

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

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

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>