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

Doing business across the U.S., Protective Life had about $3.6 billion in revenue last year and approximately $58 billion of GAAP assets last year. In the first quarter of 2013, the company’s net income amounted to $78.3 million, or $0.97 per diluted share, lower than the $99 million, or $1.18 per diluted share, a year earlier.

More favorable fundamentals

Brown & Brown, Inc. (NYSE:BRO)’s 2013 first quarter results, on the other hand, accelerated, with its net income up 21.6% to $60.1 million, or $0.41 per share, from $49.4 million, or $0.34 per share, in the same quarter last year. Similarly, Arthur J. Gallagher & Co. (NYSE:AJG)’s 2013 first quarter net income jumped 44% year-over-year to $40.5 million, or $0.32 per diluted share, from $28.1 million, or $0.24 per diluted share.

With these fundamentals, Brown & Brown and Arthur J. Gallagher & Co. (NYSE:AJG) seem to be the riper ones for the picking. Significantly, annualized earnings growth at Brown & Brown and Arthur J. Gallagher & Co. (NYSE:AJG) are outpacing the insurance brokerage business, with their respective growth of 20.95% and 27.31% against the industry’s 19%.

Protective Life, on the other hand, lags in the life insurance sector in terms of year-over-year earnings growth, with its 3.7% clip compared to the industry’s 7.9% pace. Up to what extent its recent MONY Life Insurance acquisition will eventually help improve the company’s growth rate bears watching.

Final take

Insurance companies offer enriching investment opportunities as the economic recovery continues to gain firmer footing. As in the scenarios in most sectors of business and industry today, success opens to those players who continue to reposition and reinvent themselves, as was manifested in the recent spate of M&As among insurance companies.

Arturo Cuevas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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