Brown & Brown Inc. (BRO) recently announced a merger agreement to acquire The Wright Insurance Group, LLC (Wright) for a total net consideration of $602.5 million. Brown & Brown expects the entire transaction to close by Apr 2014.
Founded in 1978, Wright operates as a fee-based private specialty insurance company that administers and underwrites property and casualty risks through three distinct segments.
The purchase consideration comprises $587.5 million of cash payments for the programs business, $7.5 million for Wright National Flood Insurance Company (WNFIC) and another $7.5 million for WNFIC statutory surplus.
Following the acquisition, Wright will continue to operate from its existing offices and all its operations will be part of the National Program Division of Brown & Brown.
The acquisition will enable Brown & Brown to be a part of the national flood insurance program (NFIP) and serve as a premier service provider to the government sponsored insurance programs, and to proprietary national and regional programs.
Additionally, the partnership will enrich Brown & Brown’s risk management product portfolio and also provide it with an expanded client base. The deal will also give Brown & Brown strong growth opportunities banking on Wright’s market expertise and its solid infrastructure and relationships with clients.
Furthermore, the transaction is expected to yield $108 million in future tax benefits for Brown & Brown.
Wright is expected to generate net revenues of $121 million for the first twelve months of operation post the closing of the deal. This translates into a year-over-year improvement over adjusted net revenue of $113.7 million in 2013. The bottom line of Wright is also expected to benefit significantly from this merger.
The acquisition at Brown & Brown was primarily supported by its strong cash position, which in turn, is owing to its continued solid operational performance across all four business divisions.
Brown & Brown is consistently treading the inorganic route to ramp up its growth profile. In Dec 2013, Brown & Brown of Kentucky Inc., a subsidiary of Brown & Brown, had agreed to acquire selected assets of O'Neil Financial Services, Agency Services Consolidated Inc. and Preserve Extended Protection Plan Inc.
Prior to that, in Jul 2013, the company had acquired insurance and risk management broker Beecher Carlson Holdings Inc. Earlier this month, Brown & Brown acquired certain assets of ICA, Inc.
Among others adopting the inorganic route is Arthur J. Gallagher & Co. (AJG), which acquired Rock Island-based Cleaveland Insurance Group, for an undisclosed amount.
Mercer, the consulting wing of Marsh & McLennan Companies Inc. (MMC) announced that it intends to purchase the pension wind-up operations of PricewaterhouseCoopers (PwC) in Canada in August, 2013.
Brown & Brown presently caries a Zacks Rank #4 (Sell). A better-ranked stock in the insurance space is Aspen Insurance Holdings Ltd. (AHL) with a Zacks Rank #1 (Strong Buy).
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