Arthur J. Gallagher & Co. AJG recently purchased The Daniels Group, Inc., expected to boost its employee benefits consulting and brokerage operations as well as solidify the company’s presence in the Northeast region of the United States.  However, financial details of the transaction remain undisclosed.

Details of the Transaction

Established in 1991, Daniels Group offers employee benefits and brokerage services. It also primarily caters to clients associated with corporations, schools, hospitals, municipalities, religious and nonprofit organizations. Additionally, it is actively involved in designing and implementing a plan as well as its administration. Post takeover, the company will shift base to Arthur J. Gallagher’s Whippany office, based in New Jersey.

The latest buyout is expected to strengthen the already robust inorganic growth portfolio of the acquirer. New Providence, NJ-based Daniels Group brings in similar work culture and interdependent core strengths to the aforementioned practice areas, which in turn, are anticipated to be highly value accretive to Arthur J. Gallagher’s client portfolio. With this acquisition, the insurance broker will not only be able to improve its employee benefits consulting and brokerage operations but also fortify its footprint in the Northeast region of the United States.

Over the past few years, Arthur J. Gallagher’s impressive growth has been mainly fueled by organic sales as well as prudent acquisitions and mergers. In the fourth quarter of 2017, the company made seven acquisitions and the momentum continued in the first quarter of 2018. The latest transaction marked the second buyout of the first quarter with the company recently buying AquaSurance, LLC, which is expected to strengthen the insurance broker’s portfolio in providing insurance services to its existing Texas water utility business. Therefore, such strategic initiatives will improve the company’s top line, resulting in overall growth.

Zacks Rank and Share Price Movement

Arthur J. Gallagher holds a Zacks Rank #2 (Buy). Shares of the company have rallied 21.5% in a year’s time, outperforming the industry’s rise of 18.4%. We expect top-line growth, prudent acquisitions and a strong capital position to drive the shares higher in the near term.  Notably, the company’s long-term earnings growth is pegged at 11.10%, better than the industry’s average of 10.80%.


 

The insurance broker is set to report fourth-quarter results on Jan 25.  However, our proven model does not conclusively show that the stock is likely to beat on earnings this season. This is because although its bullish Zacks Rank of 2 increases the predictive power of ESP, the company’s Earnings ESP of -0.45% however, leaves surprise prediction inconclusive.

Other Stocks to Consider

Investors interested in other top-ranked stocks from the insurance industry might also consider Radian Group Inc. RDN, Cigna Corporation CI and Prudential Financial, Inc. PRU, each being a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Radian Group offers mortgage and real estate products and services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 4.52%.

Cigna provides insurance and related products and services in the United States and internationally. The company came up with positive surprises in all of the last four quarters with an average beat of 14.56%.  

Prudential Financial provides insurance, investment management and other financial products and services in the United States and internationally. The company pulled off positive surprises in three of the last four quarters with an average beat of 0.16%.

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