Public Brokers’ Stocks Trading Down While M&As Fall in February, March

April 21, 2008

Stock Prices: Brokerage stocks have started 2008 in a downward spiral. Year-to-date the sector is trading down 13 percent.

M&A Activity: With 29 acquisitions announced in February and March, the year-to-date total is 56, which is down 14 percent from the same period in 2007 when 65 acquisitions were announced. During March two insurance companies bought large brokerage operations. Philadelphia Consolidated Holding Corp. (Nasdaq:PHLY) announced it acquired Gillingham & Associates Inc., a program manager specializing in commercial property/casualty insurance for the outdoor recreation and hospitality industries. Gillingham, located in Westminster, Colo., has approximately $50 million in premium. Argo Group International Holdings Ltd. (Nasdaq:AGII) announced that its Trident Insurance Services unit acquired Massamont Insurance Agency Inc. The strategic combination expands Argonaut’s public entity footprint into New England. This transaction is the evolution of a managing general agency partnership established last year. The new combined organization will do business under the Trident and Massamont names and will have operations in Boston, Chicago, San Antonio, and Greenfield, Mass.

Three banks, which rank among the top in brokerage revenue, announced transactions in February. BB&T Insurance Services plans to expand its Florida operation with the acquisition of Burkey Risk Services of metro Orlando. From its headquarters in Maitland and its south Florida office in Boynton Beach, Burkey Risk Services provides risk management and employee benefits services. Burkey subsidiary, Hotel Insurance Programs of America Inc., specializes in risk management services for hotels. Wells Fargo Insurance Services Inc. announced it acquired St. Louis-based Insurance Brokers of America. Insurance Brokers of America offers several risk management services, including property/casualty and employee benefits coverage. The company has 11 employees. BancorpSouth Insurance Services Inc., a subsidiary of BancorpSouth Bank, announced that it signed a definitive agreement to acquire the Nacogdoches, Texas-based JMG/IC Insurance Agency Inc. With written premiums in excess of $100 million, JMG/IC ranks among the nation’s largest insurance agencies. JMG/IC’s major lines of business include commercial, group, personal, surety, life, and health insurance products. The agency, which has experienced growth through both new business production and acquisitions of other agencies, operates affiliated branches and divisions in Houston, Livingston, Tyler, Henderson, and Athens, Texas and also in Itasca, Ill. One bank, Webster Financial Corp. (NYSE:WBS), sold its insurance operations. USI Holdings announced the closing of the acquisition of Webster Insurance Inc. from Webster Financial Corp. and the execution of a marketing agreement with Webster Bank. Meriden, Conn.-based Webster Insurance, is expected to contribute approximately $26 million in revenues to USI annually. Webster is one of the largest middle-market insurance brokerage firms in New England with offices in Connecticut, Massachusetts and Rhode Island.

Arthur J. Gallagher (NYSE:AJG) announced eight acquisitions during February and March, bringing their year-to-date total to 10. Brown & Brown (NYSE:BRO) and Hub International also announced transactions during February and March.

LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. Services include qualified, industry-specific advisory relating to mergers and acquisitions, capital raises and valuations. Phone: 704-943-2600. E-mail Info@LMCCapital.com. Web site: www.LMCCapital.com.

Topics Mergers Agencies

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