Arthur J. Gallagher & Co. AJG recently acquired M.J. Schuetz Insurance Services Inc. The terms of the deal have been kept under wraps.

Indianapolis, IN-based Schuetz Insurance provides property and casualty, surety and bonding services across the Midwest with industry expertise in construction, landscaping, manufacturing and real estate.  

The addition of Schuetz is expected to enhance the retail brokerage operations of Arthur J. Gallagher in the Midwest.

AJG also acquired Austin, TX-based Howe Insurance Group LLC, which is doing business as DMc Insurance Partners in December 2024. DMc Insurance Partners seems to be a prudent pick by AJG since it is a personal lines-focused insurance agency that caters to small business owners across Austin.  

With this acquisition, Arthur J. Gallagher will leverage the strong capabilities of DMc Insurance Partners to strengthen the personal lines and small business capabilities of AJG in the market.

Arthur J. Gallagher has an impressive inorganic story with buyouts in the Brokerage and Risk Management segments. Since Jan. 1, 2002, this Zacks Rank #3 (Hold) insurance broker had acquired 725 companies so far. Revenue growth rates generally ranged from 5% to 15% for 2024 acquisitions.
The company completed 27 new brokerage mergers, totaling $173.9 million of estimated annualized revenues in the first nine months of 2024. The company is growing through mergers and acquisitions, most of which are within its Brokerage segment. AJG has a strong merger pipeline of more than 100 companies representing about $1.5 billion of annualized revenues. Of these 60 term sheets are signed or being prepared, representing about $700 million of annualized revenues.

A solid capital position ensuring continuous cash inflow supports AJG in its growth initiatives. It remains focused on continuing its tuck-in mergers and acquisitions. The insurer continues to expect about $3 billion of capacity to fund M&A in 2024 and $4 billion in 2025 using only free cash and incremental borrowings.

In December 2024, AJG also agreed to acquire AssuredPartners. Pending customary regulatory approvals, the transaction is expected to be completed during the first quarter of 2025. By integrating AssuredPartners, the acquirer is expected to further expand Gallagher's retail middle-market property and casualty and employee benefits focus across the United States, build on new business opportunities by leveraging Gallagher's expertise, data and analytics and expansive product offerings.

The move will further reinforce Gallagher's capabilities across multiple niche practice groups and create opportunities for Gallagher's wholesale, reinsurance and claims management businesses. 

AJG also acquired Sheila J. Butler & Company, Dawson & Keenan Insurance Ltd. and Hann Insurance Brokers Pty Ltd. in December 2024. Financial details of all these deals are yet to be disclosed. These transactions are expected to expand AJG's retail brokerage capabilities, provide growth opportunities for retail brokerage operations, enhance the existing benefits consulting capabilities and expand the geographical footprint.

The brokerage insurer’s revenues are geographically diversified with strong domestic and international operations, with international operations contributing about one-third of revenues. Arthur J. Gallagher’s long-term growth strategies should help it deliver organic revenue improvement and pursue strategic mergers and acquisitions. AJG is focused on productivity improvements and quality enhancements that should help it post sturdy numbers in the future. 

AJG’s Price Performance

Shares of Arthur J. Gallagher have gained 0.8% in three months against the industry’s 0.7% decline. Solid performance of the Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment should continue to drive share price higher.

Image Source: Zacks Investment Research

Key Picks

Investors interested in the insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Root, Inc. ROOT and The Allstate Corporation ALL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings implies year-over-year growth of 7.1% and 30.6%, respectively. The Zacks Consensus Estimate for FAF’s 2024 and 2025 revenues implies year-over-year growth of 1.2% and 17.1%, respectively. In three months, shares of FAF have lost 5.8%.

The Zacks Consensus Estimate for Root’s 2024 and 2025 revenues implies year-over-year growth of 147.9% and 3.8%. It beat earnings estimates in each of the past four quarters, with an average surprise of 127.21%. In three months, shares of ROOT have skyrocketed 80.8%.

The Zacks Consensus Estimate for The Allstate’s 2024 and 2025 revenues implies year-over-year growth of 1611.58% and 17.8%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 135.21%. In three months, shares of ALL have lost 0.9%.

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

The Allstate Corporation (ALL) : Free Stock Analysis Report

First American Financial Corporation (FAF) : Free Stock Analysis Report

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

Root, Inc. (ROOT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research