Brown & Brown (BRO) Unit Set to Acquire Berkshire Subsidiary
Brown & Brown (BRO) agrees to acquire Berkshire Insurance to reinforce its footprint in Massachusetts.
Brown & Brown, Inc. BRO has reached an agreement with Berkshire Hills Bancorp, Inc. BHLB for the sale of the assets and operations of Berkshire Insurance Group, Inc., a subsidiary of Berkshire Hills, to the subsidiary of Brown & Brown, Brown & Brown of Massachusetts, LLC.
Pending regulatory conditions, the deal is projected to be completed in the third quarter of 2021.
Berkshire Insurance Group has been offering insurance products and services to individual and business clients across New England, New York, New Jersey and Pennsylvania since 2000. It provides personal and commercial property and casualty insurance solutions and has grown into one of the largest insurance agencies in Western Massachusetts. Berkshire Insurance Group has multiple locations throughout Berkshire County and the Pioneer Valley.
The acquisition will enable Brown & Brown to widen its footprint in Massachusetts along with several new strategic locations from where the acquirer will be able to better serve customers. It sees further opportunities to provide a wide array of insurance products and services to new and existing customers.
In compliance with Berkshire’s Exciting Strategic Transformation (BEST) program, the recent deal will enable Berkshire to streamline its operating model, repurpose valuable resources as well as redeploy capital to support core businesses and strategic initiatives that will boost long-term stakeholder value. Following the deal, Berkshire is expected to make a net gain on sales of nearly 55 cents per share on a GAAP basis in the third quarter. It also anticipates 2 cents lower earnings per share in the second half of 2021.
This transaction will enable Berkshire to serve customers better with a wider offering of insurance solutions.
Inorganic Growth Story
Brown & Brown along with its subsidiaries pursues frequent buyouts in order to achieve top-line growth. Its revenues received a boost as a result of persistent focus on net new business growth and acquisitions.
Consistent investments and solid earnings will likely aid this Zacks Rank #2 (Buy) insurance broker in carrying out inorganic efforts. Acquisitions drive Brown & Brown’s commission and fees, which, in turn, boost revenue growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
From 1993 through second-quarter 2021, the company acquired 565 insurance intermediary operations. It remains well poised with its low leverage, capital structure and access to additional capital to fund its merger and acquisition activities. Moreover, consistent operational results have helped Brown & Brown to generate solid cash flows to be deployed in strategic initiatives. So far this year, it has made six acquisitions.
The stock has risen 26.4% in the past year compared with the industry’s growth of 15.3%. The company’s efforts to ramp up growth and capital position should continue to drive its shares.
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Other Acquisitions in the Same Space
Given the insurance industry’s adequate capital level, the players are pursuing strategic mergers and acquisitions. Arthur J. Gallagher & Co. AJG inked an agreement to buy Willis Towers Watson plc’s WLTW Willis Re for $3.25 billion in cash to expand its global value proposition in reinsurance.
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Arthur J. Gallagher & Co. (AJG): Free Stock Analysis Report
Brown & Brown, Inc. (BRO): Free Stock Analysis Report
Berkshire Hills Bancorp, Inc. (BHLB): Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WLTW): Free Stock Analysis Report
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