Aon to Acquire National Flood Services, Boost Flood Insurance Biz - Analyst Blog

By Zacks.com, June 16, 2014, 05:45:00 PM EDT

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Aon plc ( AON ), a company in the global risk management and insurance brokerage space known for the consistent enhancement of its services, is now making headlines with its latest endeavor. The company's subsidiary, Aon US Holdings, Inc. recently inked a definitive acquisition agreement with StoneRiver Group, L.P. Pursuant to the agreement, Aon will acquire StoneRiver National Flood Services, Inc. and related entities ("National Flood Services") from StoneRiver.

The acquisition of National Flood Services, a leading flood insurance processor is aimed to help Aon Affinity cater to the growing demand for flood insurance solutions. Aon Affinity is the consumer, association and group program business of Aon Risk Solutions - the global risk management business of the holding company.

Aon Affinity has been providing customized and innovative insurance solutions to more than 18 million individual customers for the past 60 years. The latest acquisition will complement the company's services by expanding its flood offerings and distribution. The acquirer intends to capitalize on the resources of National Flood Services to boost its existing portfolio of flood insurance.

Over the past century, due to the transition toward a more urban society, the U.S. witnessed changes in land use that led to an increased number of floods. Consequently, the demand for insurance coverage products has increased. To meet this demand, insurers are pulling up their socks to enhance flexibility and increase the capacities to provide customized, client specific flood insurance products. Thus, we believe that at this juncture, the acquisition of National Flood Services will enable Aon to deliver improved flood insurance products to clients.

While Aon Affinity generated $4 billion in global premiums in 2013, National Flood Services generates $2.3 billion of flood insurance premium annually. Thus, the integration of National Flood Services in its portfolio will expectedly result in a surge in premiums going forward.

Currently, Aon carries a Zacks Rank #2 (Buy). Other players in the industry that look attractive at current levels include Cninsure Inc. ( CISG ), Erie Indemnity Company ( ERIE ) and Blue Capital Reinsurance Holdings Ltd. ( BCRH ). All these stocks have the same Zacks Rank as Aon.