Arthur J. Gallagher Expands In England With Pavey Group Buyout

Arthur J. Gallagher & Co. (NYSE:AJG) recently acquired Pavey Group in an effort to expand outside the United States. The terms of the transaction remain undisclosed.

United Kingdom-based Pavey Group is a retail insurance broker offering retail property and casualty insurance and risk management advice to commercial businesses, care facilities, charities and construction, manufacturing, agricultural and leisure sectors. The company operates through offices in Torquay, Exeter, Holsworthy and Highbridge, England.

The acquisition will help Arthur J. Gallagher consolidate its presence in South West England. Pavey Group will operate as part of the acquirer’s UK Retail Division.

Arthur J. Gallagher derives about one-third of its revenues from international operations. Notably, all its acquisitions in the month so far have been outside the United States. Recently, the Zacks Rank #3 (Hold) insurance broker acquired Marks Insurance NZ in New Zealand, BMG Aviation in Australia and the book of business of Boston Marks Insurance Brokers in the United Kingdom. In early December, it expanded in Asia with the purchase of 40% equity interest in PT IBS Insurance Broking Service and 100% stake in IBS Re Singapore. Given the number and size of the non-U.S. acquisitions, the insurance broker expects international contribution to total revenues to increase.

Given the insurance industry’s all-time high capital level, insurers are aggressively pursuing mergers and acquisitions to ramp up growth, expand footprint, enhance capabilities and diversify operations. Arthur J. Gallagher’s inorganic pipeline remains strong with about $500 million of revenues.

Shares of Arthur J. Gallagher have rallied 17.7% year to date, outperforming the industry’s increase of 9.6%. Its expansion policy to ramp up growth and a strong capital position should help retain the momentum.

Insurers on Integration Spree

Recently, Brown & Brown, Inc.’s (NYSE:BRO) subsidiary, Brown & Brown of Kentucky, Inc., acquired Dealer Associates, Inc. to ramp up its dealer services team in Southwest. Arch Capital Group Ltd (NASDAQ:ACGL) acquired McNeil & Co. to boost its underwriting business. Last month, Marsh & McLennan Companies, Inc.'s (NYSE:MMC) unit Mercer acquired investment consulting, alternatives consulting and wealth management operations of Pavilion Financial Corporation to provide wider and deeper global research and specialist resources to its consultants and clients.

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

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