Brown & Brown, Inc. (BRO), Arthur J. Gallagher & Co. (AJG): Who Will Profit From Insurance Industry M&As?

Expectation that mergers and acquisitions (M&As) in the insurance industry will take off again in 2013 appears to be materializing. This opens the possibility of significant power shifts among industry players, in turn unraveling some investing opportunities. In recent weeks, there have been some major M&As, which provide some insights into positioning of the equities concerned.

One is the $336.5 million acquisition by Brown & Brown, Inc. (NYSE:BRO) of its competitor, Beecher Carlson Holdings, which is ranked as the 27th biggest broker of U.S. businesses. Prior to the purchase, which will be consummated this July, Brown & Brown, Inc. (NYSE:BRO) already holds the seventh position among the world’s largest insurance brokerages, and its new acquisition should further bolster this standing.

Entering a new league

Having Beecher Carlson in its fold will take Brown & Brown, Inc. (NYSE:BRO) to the large-account business. All told, the acquisition can add roughly 8% to the company’s total revenue, per one analyst’s estimate.

In yet another move that should shore up Brown & Brown, Inc. (NYSE:BRO)’s competitive advantage in the industry, the company’s New York subsidiary acquired certain assets of The Rollins Agency, one of the top insurance companies in the tri-state region of Connecticut, New Jersey, and New York. Significantly, the new acquisition and asset purchase comes on the heels of Brown & Brown, Inc. (NYSE:BRO)’s $395 million acquisition of Arrowhead General Insurance Agency in December 2011.

A Texan hand into the mix

Also prominent in the insurance industry M&A scene is Arthur J. Gallagher & Co. (NYSE:AJG), one of the largest insurance brokers and third-party property/casualty claims administrators in the world. It announced this May that it is acquiring, for an undisclosed sum, the Weslaco, TX-based Garza Long Group (GLG). Founded in 2011, GLG provides a wide range of employee benefit program consulting services throughout Texas and the Rio Grande Valley.

Recently, Arthur J. Gallagher & Co. (NYSE:AJG)’s risk management services unit also entered into a strategic relationship with CastleLine Holdings. This tie-up is designed to provide clients with a wide range of innovative products and services in the origination, underwriting, and purchase of home mortgages.

A big move in life insurance

In the second half of 2013, Protective Life Corp. (NYSE:PL) is set to close the deal for its acquisition of MONY Life Insurance for about $1.06 billion. Protective Life Corp. (NYSE:PL) expects the deal to contribute $0.10–$0.15 per share to its 2013 earnings, $0.55–$0.65 per share in 2014, and $0.65–$0.75 per share in 2015.