The Zacks Analyst Blog Highlights: Reinsurance Group of America, Arthur J. Gallagher, Aon, Brown & Brown and Marsh & McLennan
CHICAGO, Aug. 18, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Reinsurance Group of America Inc. (NYSE:RGA-Free Report), Arthur J. Gallagher & Co. (NYSE:AJG-Free Report), Aon plc (NYSE:AON-Free Report), Brown & Brown Inc. (NYSE:BRO-Free Report) and Marsh & McLennan Companies Inc. (NYSE:MMC-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Friday's Analyst Blog:
Reinsurance Group (RGA) Poised for Growth
We issued an updated research report on Reinsurance Group of America Inc. (NYSE:RGA-Free Report) on Aug 13. The life reinsurer reported second-quarter 2014 operating income of $2.23 per share, significantly ahead of the Zacks Consensus Estimate of $2.06. In the year-ago quarter, the company had posted an operating loss of 99 cents per share. The quarter's results were driven by strong international earnings, both from Europe, Middle East and Africa (EMEA) and Asia Pacific along with continued momentum in Global Financial Solutions.
Total revenue of $2.83 billion increased 9.4% year over year but was slightly below the Zacks Consensus Estimate of $2.86 billion.
The company is a leader in the U.S. Latin America Traditional market. The company has a successful product line expansion with market leading services, capabilities, expertise and innovation. In spite of a difficult insurance market, the company has grown net premium at a CAGR of 8.2% from 2009 to 2013.
In Canada , the company is market leader with solid growth and profitability. The company has a sizable in-force business, which would be a significant source of future earnings. Any new business is expected to add value.
In Asia, the company has a significant presence in Hong Kong , Japan , India , Korea and Taiwan . The company believes that economic growth and demographic trends leading to rapid growth in insurance market, protection and living benefits present abundant growth opportunities in this region.
However, the company ' s Australia business has been underperforming for quite some time, due to intensely competitive direct and reinsurance markets, complex product designs and weakening claims experience.
Moreover, evolving capital requirements from Solvency II regulations, continuing low interest rates and a significant exposure to foreign exchange can impart earnings volatility.
Nevertheless, the company ' s intelligent use of capital by way of regular share buyback and dividend payments have created value for shareholders.
The company has also witnessed an increase in earnings estimates. Over the past 30 days, the Zacks Consensus Estimate for 2014 has gone up 4% to $8.09 and the same for 2015 is up 1.4% to $8.69.
Reinsurance Group of America carries a Zacks Rank #3 (Hold).
Arthur J. Gallagher on a Binge with 4 August Buyouts
Arthur J. Gallagher & Co. (NYSE:AJG-Free Report) continues with its acquisitions. The insurance broker has announced four acquisitions to date in August.
Acquisitions include certain assets of eastern Caribbean based Minvielle & Chastanet Insurance Brokers (widening presence into Antigua and Dominica), Connecticut based Cowles & Connell (enhancing wholesale geographic footprint and network), Missouri based Trip Mate, Inc. (helping foray into travel insurance market), and Colorado based Denman Consulting Services (augmenting employee benefits operations).
Arthur J. Gallagher & Co. remains focused on international expansion through both acquisitions and organic measures. The company's international operations, primarily in Australia, Bermuda, Canada, the Caribbean, Singapore, New Zealand and the U.K., generated about 30% of its revenues. With this flurry of acquisitions, the number is expected to grow further.
Arthur J. Gallagher & Co.'s growth story looks impressive. While the buyouts widen its geographical footprint, these also support the enhanced portfolio of services, and strengthen its position in retail and wholesale insurance brokerage services and risk management industries.
In the second quarter of 2014, Arthur J. Gallagher & Co. closed 17 acquisitions with annualized revenues totaling $497.1 million. In the ongoing quarter, the insurance broker wrapped up seven acquisitions including the above four and penned a deal for one more.
Arthur J. Gallagher & Co. expects its clean energy investments to contribute $99–$110 million to this year's net earnings that should in turn support its acquisition strategy. In addition, the company's cash balance – up 3.3 times from 2013 end – and retained earnings of $596.9 million (up 8.7% from 2013 end) bear testimony to its financial health.
Though earnings of Arthur J. Gallagher & Co. in the second quarter missed the Zacks Consensus Estimate and deteriorated from the year-ago earnings due to higher expenses, it has been witnessing upward revisions on strong fundamentals. The Zacks Consensus Estimate moved up as most of the estimates were raised in the last 30 days. It is currently pegged at $2.51 (up 2%) for 2014 and $2.93 (up 1.7%) for 2015. These translate to year-over-year improvement of 24.9% and 16.7% for 2014 and 2015, respectively. The expected long-term earnings growth rate is 14.6%.
With optimism surrounding the acquisitions, we expect analysts to raise their estimates exerting upward pressure on the Zacks Rank. The stock presently carries Zacks Rank #3 (Hold).
As insurance brokers choose the inorganic route for growth, the takeover saga rages the space. This month, Aon plc's (NYSE:AON-Free Report) global risk management business, Aon Risk Solutions acquired a Lima-Peru based risk and insurance solutions provider, Grana y Asociados. In June, Brown & Brown Inc. (NYSE:BRO-Free Report) acquired select assets of Gaston & Associates. Also, Marsh Inc., the insurance brokerage wing of Marsh & McLennan Companies Inc. (NYSE:MMC-Free Report) announced its intention to acquire a major stake in Panama-based Seguros Morrice y Urrutia SA (Semusa) in June.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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