Brown & Brown, Inc.’s BRO shares have gained 0.4% in the last two days, following the acquisition of the assets of Rainmaker Advisory, LLC by its unit Brown & Brown Dealer Services (“BBDS”) on Dec 14.
Ventura, CA-based Rainmaker Advisory offers finance and insurance (F&I) product and reinsurance planning for auto and RV dealers.
With the deal, Brown & Brown will leverage Rainmaker Advisory’s experience in F&I products to boost and increase its existing capabilities for its dealer customers and establish its footprint in the West Coast.
Mike Neal, president of BBDS, stated, “Our shared values of customer-first focus along with best-in-class industry knowledge confirm that the Rainmaker team is a natural fit for Brown & Brown Dealer Services.”
As far as Rainmaker Advisory is concerned, this recent transaction is expected to provide it with growth opportunities to better serve its dealer customers.
The latest transaction marks the seventh buyout for BRO in fourth-quarter 2021.
Inorganic Growth Story
Brown & Brown along with its subsidiaries pursues frequent buyouts in order to achieve top-line growth. Its revenues received a boost as a result of a persistent focus on net new business growth and acquisitions. Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. Also, strategic acquisitions and mergers help it spread its operations.
Consistent investments and solid earnings will likely aid this Zacks Rank #2 (Buy) insurance broker in carrying out its inorganic efforts, expanding its capabilities and extending its geographic footprint. Acquisitions drive Brown & Brown’s commission and fees, which, in turn, boost revenue growth. Through the first nine months of 2021, the insurance broker completed 11 acquisitions with annual revenues of approximately $65 million.
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From 1993 through third-quarter 2021, the company acquired 572 insurance intermediary operations. BRO remains well poised with its low leverage, capital structure, and access to additional capital to fund its merger and acquisition activities. Consistent operational performance has helped Brown & Brown generate solid cash flows for deployment in strategic initiatives. The company has maintained a strong liquidity position, with $944 million of cash and cash equivalents as well as $800 million of accessible capital on revolver credit.
The stock has risen 46.3% in the past year compared with the industry’s growth of 26.9%. Brown & Brown’s efforts to ramp up growth and capital position should continue to drive its shares.
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Other Acquisitions in the Same Space
Given the insurance industry’s adequate capital level, players like Athene Holdings ATH, Arthur J. Gallagher & Co. AJG, and Marsh & McLennan Companies MMC are pursuing strategic mergers and acquisitions.
Athene and Apollo Global have agreed to buy a majority interest in Aqua Finance to boost Apollo’s $80 billion annual run-rate of asset origination across commercial and consumer lending platforms. Athene boasts an impressive inorganic growth, which has been driven by several buyouts and block reinsurance transactions with several companies. ATH expects its inorganic growth channel to continue to be an important driver in the future.
Arthur J. Gallagher recently acquired Tave Risk Management, LLC to boost its existing capabilities in the property and casualty insurance space. Arthur J. Gallagher remains focused on long-term growth strategies for delivering organic revenue improvement and pursuing strategic mergers and acquisitions. AJG is focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future.
Marsh & McLennan’s unit Marsh McLennan (NYSE:MMC) Agency acquired InSource Insurance Group to leverage InSource’s know-how in the oil and gas industry and enhance capabilities. Marsh & McLennan has made numerous purchases within its different operating units that enabled it to enter new geographies, expand within the existing locations, foray into new businesses, develop new segments and specialize within its current businesses.
Shares of Athene, Arthur J. Gallagher and Marsh & McLennan have gained 90.1%, 32.5% and 46.2%, respectively, in the same time frame.
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