Brown & Brown's Subsidiary Closes The Colonial Group Buyout

Brown & Brown, Inc.’s (NYSE:BRO) subsidiary, Hull & Company, LLC closed the buyout of all the assets of The Colonial Group, Inc., Affordable Home Services, Inc., and Mobilhome Insurance Service, Inc. (collectively, The Colonial Group). It has also acquired the issued and outstanding shares of Colonial Premium Finance Company, the affiliate of The Colonial Group.

Formed in 1961, The Colonial Group is a North Carolina-based managing general agency which specialises in the field of housing, recreational and specialty insurance. The company serves independent retail insurance agents placing property and casualty insurance for businesses and individuals across the Southeast.

Rationale Behind the Deal

The acquisition is expected to assist customers, employees and carriers of both the organizations and will provide them with enhanced growth opportunities.

With this buyout, members of The Colonial Group will get the opportunity to access resources. It will also boost their carrier relationships and serve the team with new opportunities.

This transaction marks the fourth buyout for Brown & Brown in the first quarter of fiscal 2020. Consistent investments along with solid earnings help this Zacks Rank #2 (Buy) insurance broker in inorganic efforts and buyouts. These strategic buyouts assist Brown & Brown to increase commissions and fees, which, in turn, drive revenues.

Brown & Brown maintains a disciplined focus on acquiring companies that are strategic fits. In 2019, it closed 23 transactions with approximately $105 million of annual revenues. The company has acquired 500 insurance intermediary operations in more than two decades. It continues to make investments to drive growth and margin expansion.

Other Acquisitions in the Same Space

Recently, there have been a number of acquisitions in the insurance industry, given the significant capital available. For example, Arthur J. Gallagher & Co. (NYSE:AJG) acquired full-service wholesale insurance broker CMS, LLC to support its construction and real estate practice and further expand its subsidiary.

Also, Aon plc (NYSE:AON) entered into an agreement with Willis Towers Watson Public Limited Company (NASDAQ:WLTW) to combine in an all-stock deal, which is expected to cater to unmet client requirements and fight the evolving insurance industry threats. This acquisition is the insurance sector's largest deal, combining the world’s second and the largest insurance brokers.

Shares of Brown & Brown have gained 28.9% in the past year, outperforming the industry’s growth of 2.2%. The company’s efforts to ramp up growth and its solid capital position should continue to drive shares higher.

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

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