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Arthur J. Gallagher (AJG) Closes Buyout of Alpha Surety

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Arthur J. Gallagher & Co. AJG recently acquired Alpha Surety & Insurance Brokerage, LLC. The terms of the transaction have been kept under wraps.

Founded in 2002, Little Rock, AR-based Alpha Surety & Insurance Brokerage is focused on selling direct and wholesale commercial surety bonds in industry sectors. These include money transmitters, cryptocurrency, professional employer organizations, debt managers, mortgage and finance lenders, fundraisers and others. Its capabilities range from providing all types of single surety bonds to developing national surety programs to benefit specific industries.

This recent transaction is a strategic fit for Arthur J. Gallagher as it is expected to widen and boost the acquirer’s market expertise as well as product offerings in the Surety space.

The latest transaction marks the sixth buyout of the insurance broker in third-quarter 2021.

Inorganic Growth Story

Acquisitions enable Arthur J. Gallagher to expand into desirable geographic locations, extend its presence in retail and wholesale insurance and reinsurance brokerage services markets, and increase the volume of general services that it currently provides. Its inorganic pipeline remains strong with around $300 million of annualized revenues associated with 40 term sheets signed or being prepared.

Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold).

Arthur J. Gallagher‘s solid capital position supports its growth initiatives. The company estimates more than $2.5 billion for mergers and acquisitions, consisting of $1 billion in cash, about $650 million of net cash generation in the second half of 2021, and $600 million to $700 million of borrowing capacity.

So far this year, it has made 22 acquisitions. Revenue growth rates have generally been 5-15% for 2021 acquisitions to date. The buyouts provide the company with incremental capabilities and services to assist clients across Australia, the U.K., Europe, and the United States. The company has been intensifying focus on its long-term growth strategies of delivering organic revenue growth, and pursuing mergers and acquisitions.

Other Acquisitions in the Same Space

There have been a host of acquisitions in the insurance space of late, given its significant capital availability. Brown & Brown, Inc.’s BRO subsidiary Bridge Specialty Group, LLC has acquired substantially all assets of Gremesco of New Jersey, LLC. Marsh McLennan’s MMC Marsh McLennan Agency has acquired Vaaler Insurance.

Price Performance

Shares of Arthur J. Gallagher have gained 40% in a year, outperforming the industry’s increase of 13.7%. Efforts to ramp up the company’s growth profile and capital position should help the stock retain the price momentum.

Zacks Investment Research
Zacks Investment Research

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A Stock That Warrants a Look

A better-ranked stock from the same space is Aon plc AON, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aon surpassed estimates in each of the last four quarters, with the average surprise being 10.03%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report

Aon plc (AON) : Free Stock Analysis Report

Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

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