We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
4 Insurance Brokerage Stocks to Benefit From Higher Demand
Read MoreHide Full Article
Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving revenues of Zacks Insurance Brokerage industry players. The fast-paced consolidations in this traditionally fragmented industry are expected to benefit Marsh & McLennan Companies (MMC - Free Report) , Arthur J. Gallagher & Co. (AJG - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Willis Towers Watson Public Limited Company (WTW - Free Report) .
Increased digitization should help the industry to improve basis points, scale and efficiencies.
About Insurance Brokerage Industry
The Zacks Brokerage Insurance industry comprises companies that primarily offer insurance and reinsurance products and services. Insurance brokers act on behalf of their clients and provide advice in return for brokerage fees. Their business is directly linked with clients’ business activities. Some of these companies are involved in providing risk management, third-party administration and managed healthcare services. Per a report by Mordor Intelligence, insurance brokerage market size is anticipated to reach $320.55 billion and $381.81 billion in 2024 and 2029, respectively, seeing a five-year (2024-2029) CAGR of 3.56%. Per Technavio's market insights, market size of insurance industry is projected to grow $1.40 trillion, witnessing a five-year (2023-2028) CAGR of 4.25%. Accelerated digitalization should help in the smooth functioning.
3 Trends Shaping the Future of the Insurance Brokerage Industry
Increased Demand for Products to Drive Revenues: The operational results of the industry players are dependent on clients’ level of business activity, which depends on the extent of economic activity in the industries and markets they serve. Thus, growth of insurance brokers depends on the demand for insurance products, driven by increased awareness. Keeping this in mind, industry players are expanding globally, cross-selling products, improving pricing, tightening underwriting standards and designing products that are more appealing to customers and match their risk appetite. Better pricing ensures higher commissions for the industry players.
An increase in the aging population is driving the demand for retirement benefit products, while the rising population of baby boomers and millennials, and increasing awareness are boosting the demand for medical insurance, life insurance, accidental insurance and other forms of insurance. Per a report by Mordor Intelligence, the rising demand for insurance policies among people drives growth of the insurance brokerage market. Per the report, the demand hike reflects increased awareness among customers and the importance of insurance policies.
Mergers & Acquisitions: The insurance brokerage industry is witnessing fast-paced consolidation. Per a report by Mordor Intelligence, the insurance brokerage market is driven by persistently growing mergers and acquisitions. The industry has been traditionally fragmented, with a number of small players. One of the factors driving mergers and acquisitions is the companies’ need to become specialized in their businesses. Some other factors driving merger and acquisition are the interest shown by private equity firms in this sector, growing competition and slow organic growth. Per Deloitte Insights, the insurance industry is expected to witness more acquisition opportunities in 2024.
Increased Adoption of Technology: Insurance brokers are adopting digital tools for improved policy management, claim processing and better customer interactions. Insurance companies are teaming up with insurtechs firms to accelerate the integration of innovative technologies like artificial intelligence (AI), machine learning, blockchain and IoT. The increased use of data analytics and AI integration enables brokers to offer personalized services, boost operational efficiency, improve risk assessment and streamline operations.
Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion. This digital shift is expected to drive premium growth and boost efficiency. Per Deloitte Insights, the insurance players are estimated to write $4.7 billion in annual global premiums from AI-related insurance, compounded at an annual growth rate of 80% by 2032. However, expenses associated with such investments increase costs and, in turn, the expense ratio.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Insurance - Brokerage industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #150, which places it in the bottom 40% of more than 252 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, signifies encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is the result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are upbeat about this group’s earnings growth potential. The industry’s earnings estimates for 2024 have moved up 2.4% in a year. Before we present a few insurance broker stocks that you may want to consider for your portfolio, let us take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms Sector & S&P 500
The Insurance Brokerage industry has outperformed its sector and the Zacks S&P 500 composite year to date. The stocks in this industry have collectively grown 31.6% year to date compared with the Finance sector’s rise of 14.8% and the Zacks S&P 500 composite’s rally of 19.9% over the same period.
Year to Date Price Performance
Current Valuation
On the basis of a trailing 12-month price-to-book (P/B), commonly used for valuing insurance stocks, the industry is currently trading at 7.68X compared with the Zacks S&P 500 composite’s 8.69X and the sector’s 3.8X.
Over the past five years, the industry has traded as high as 8.02X, as low as 4.51X and at the median of 6.60X.
Marsh & McLennan: The New York-based company, with a market capitalization of $109.1 billion, provides advice and solutions to clients in the areas of risk, strategy and people worldwide. This insurance broker is well-poised to grow on significant investments and acquisitions made within its operating units, product launches, enhanced digital capabilities and new businesses.
Earnings of Marsh & McLennan have grown 13% in the past five years. The expected long-term earnings growth rate is 7.3%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 9.3% and 7.8%, respectively. This insurance broker delivered a trailing four-quarter earnings surprise of 5.80%, on average. The stock has gained 17.1% year to date.
Price and Consensus: MMC
Arthur J. Gallagher: Headquartered in Itasca, IL, the company, with a market capitalization of $62.67 billion, is the world’s largest property/casualty third-party claims administrator and the fourth largest among insurance brokers (based on revenues). AJG is poised to benefit from the growing contribution of its Brokerage and Risk Management segments. This, in turn, is driving organic revenues.
Given the number and size of its non-U.S. acquisitions, Arthur J. Gallagher expects an increase in international contribution to total revenues. Business production and retention bode well for consistent growth. AJG estimates organic growth between 7% and 9% in the Brokerage segment, whereas the same for the Risk Management segment is expected to be 9%. Margins are expected to be 20.5% in 2024.
Earnings of Arthur J. Gallagher have grown 20.7% in the past five years, better than the industry average of 13.2%. The expected long-term earnings growth rate is 11.6%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 15.4% and 12.1%, respectively. This insurance broker delivered a trailing four-quarter earnings surprise of 1.93%, on average. The stock has gained 27.2% year to date.
Price and Consensus: AJG
Brown & Brown: The company, with a market capitalization of $29.84 billion and headquartered in Daytona Beach, FL, markets and sells insurance products and services in the United States, as well as London, Bermuda and the Cayman Islands. New businesses, better customer retention, premium rate increases across the majority of business lines, strategic acquisitions and a strong financial position should continue to drive growth for this insurer.
Earnings of Brown & Brown have grown 18.4% in the past five years. The expected long-term earnings growth rate is 11.7%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 30.9% and 8.9%, respectively. BRO delivered a trailing four-quarter earnings surprise of 9.82%, on average. The consensus estimate for 2024 and 2025 earnings has moved 0.2% and 1% north, respectively, in the past 60 days. The stock has gained 47.2% year to date.
Price and Consensus: BRO
Willis Towers: Based in London, the U.K., WTW, with a market capitalization of $29.51 billion, is a leading global advisory, broking and solutions company. Growing healthcare premiums, increased consulting work and software sales, strategic buyouts, and effective capital deployment bode well for growth. Willis Towers’ growth strategy focuses on core opportunities with highest growth and returns. The broker innovated and developed its offerings in markets, and boosted its abilities in faster-growth markets.
Earnings for this insurance broker have grown 8.2% in the past five years. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 14% and 12.5%, respectively. WTW delivered a trailing four-quarter earnings surprise of 7.06%, on average. The consensus estimate for 2024 and 2025 earnings has moved 0.06% and 0.1% north, respectively, in the past 30 days. The stock has gained 20.5% year to date.
Price and Consensus: WTW
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 Insurance Brokerage Stocks to Benefit From Higher Demand
Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving revenues of Zacks Insurance Brokerage industry players. The fast-paced consolidations in this traditionally fragmented industry are expected to benefit Marsh & McLennan Companies (MMC - Free Report) , Arthur J. Gallagher & Co. (AJG - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Willis Towers Watson Public Limited Company (WTW - Free Report) .
Increased digitization should help the industry to improve basis points, scale and efficiencies.
About Insurance Brokerage Industry
The Zacks Brokerage Insurance industry comprises companies that primarily offer insurance and reinsurance products and services. Insurance brokers act on behalf of their clients and provide advice in return for brokerage fees. Their business is directly linked with clients’ business activities. Some of these companies are involved in providing risk management, third-party administration and managed healthcare services. Per a report by Mordor Intelligence, insurance brokerage market size is anticipated to reach $320.55 billion and $381.81 billion in 2024 and 2029, respectively, seeing a five-year (2024-2029) CAGR of 3.56%. Per Technavio's market insights, market size of insurance industry is projected to grow $1.40 trillion, witnessing a five-year (2023-2028) CAGR of 4.25%. Accelerated digitalization should help in the smooth functioning.
3 Trends Shaping the Future of the Insurance Brokerage Industry
Increased Demand for Products to Drive Revenues: The operational results of the industry players are dependent on clients’ level of business activity, which depends on the extent of economic activity in the industries and markets they serve. Thus, growth of insurance brokers depends on the demand for insurance products, driven by increased awareness. Keeping this in mind, industry players are expanding globally, cross-selling products, improving pricing, tightening underwriting standards and designing products that are more appealing to customers and match their risk appetite. Better pricing ensures higher commissions for the industry players.
An increase in the aging population is driving the demand for retirement benefit products, while the rising population of baby boomers and millennials, and increasing awareness are boosting the demand for medical insurance, life insurance, accidental insurance and other forms of insurance. Per a report by Mordor Intelligence, the rising demand for insurance policies among people drives growth of the insurance brokerage market. Per the report, the demand hike reflects increased awareness among customers and the importance of insurance policies.
Mergers & Acquisitions: The insurance brokerage industry is witnessing fast-paced consolidation. Per a report by Mordor Intelligence, the insurance brokerage market is driven by persistently growing mergers and acquisitions. The industry has been traditionally fragmented, with a number of small players. One of the factors driving mergers and acquisitions is the companies’ need to become specialized in their businesses. Some other factors driving merger and acquisition are the interest shown by private equity firms in this sector, growing competition and slow organic growth. Per Deloitte Insights, the insurance industry is expected to witness more acquisition opportunities in 2024.
Increased Adoption of Technology: Insurance brokers are adopting digital tools for improved policy management, claim processing and better customer interactions. Insurance companies are teaming up with insurtechs firms to accelerate the integration of innovative technologies like artificial intelligence (AI), machine learning, blockchain and IoT. The increased use of data analytics and AI integration enables brokers to offer personalized services, boost operational efficiency, improve risk assessment and streamline operations.
Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion. This digital shift is expected to drive premium growth and boost efficiency. Per Deloitte Insights, the insurance players are estimated to write $4.7 billion in annual global premiums from AI-related insurance, compounded at an annual growth rate of 80% by 2032. However, expenses associated with such investments increase costs and, in turn, the expense ratio.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Insurance - Brokerage industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #150, which places it in the bottom 40% of more than 252 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, signifies encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is the result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are upbeat about this group’s earnings growth potential. The industry’s earnings estimates for 2024 have moved up 2.4% in a year.
Before we present a few insurance broker stocks that you may want to consider for your portfolio, let us take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms Sector & S&P 500
The Insurance Brokerage industry has outperformed its sector and the Zacks S&P 500 composite year to date. The stocks in this industry have collectively grown 31.6% year to date compared with the Finance sector’s rise of 14.8% and the Zacks S&P 500 composite’s rally of 19.9% over the same period.
Year to Date Price Performance
Current Valuation
On the basis of a trailing 12-month price-to-book (P/B), commonly used for valuing insurance stocks, the industry is currently trading at 7.68X compared with the Zacks S&P 500 composite’s 8.69X and the sector’s 3.8X.
Over the past five years, the industry has traded as high as 8.02X, as low as 4.51X and at the median of 6.60X.
Trailing 12-Month Price-to-Book (P/B) Ratio
Trailing 12-Month Price-to-Book (P/B) Ratio
4 Insurance Brokerage Stocks for Better Returns
Below, we have presented four stocks with a Zacks Rank #3 (Hold) from the Insurance Brokerage space. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marsh & McLennan: The New York-based company, with a market capitalization of $109.1 billion, provides advice and solutions to clients in the areas of risk, strategy and people worldwide. This insurance broker is well-poised to grow on significant investments and acquisitions made within its operating units, product launches, enhanced digital capabilities and new businesses.
Earnings of Marsh & McLennan have grown 13% in the past five years. The expected long-term earnings growth rate is 7.3%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 9.3% and 7.8%, respectively. This insurance broker delivered a trailing four-quarter earnings surprise of 5.80%, on average. The stock has gained 17.1% year to date.
Price and Consensus: MMC
Arthur J. Gallagher: Headquartered in Itasca, IL, the company, with a market capitalization of $62.67 billion, is the world’s largest property/casualty third-party claims administrator and the fourth largest among insurance brokers (based on revenues). AJG is poised to benefit from the growing contribution of its Brokerage and Risk Management segments. This, in turn, is driving organic revenues.
Given the number and size of its non-U.S. acquisitions, Arthur J. Gallagher expects an increase in international contribution to total revenues. Business production and retention bode well for consistent growth. AJG estimates organic growth between 7% and 9% in the Brokerage segment, whereas the same for the Risk Management segment is expected to be 9%. Margins are expected to be 20.5% in 2024.
Earnings of Arthur J. Gallagher have grown 20.7% in the past five years, better than the industry average of 13.2%. The expected long-term earnings growth rate is 11.6%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 15.4% and 12.1%, respectively. This insurance broker delivered a trailing four-quarter earnings surprise of 1.93%, on average. The stock has gained 27.2% year to date.
Price and Consensus: AJG
Brown & Brown: The company, with a market capitalization of $29.84 billion and headquartered in Daytona Beach, FL, markets and sells insurance products and services in the United States, as well as London, Bermuda and the Cayman Islands. New businesses, better customer retention, premium rate increases across the majority of business lines, strategic acquisitions and a strong financial position should continue to drive growth for this insurer.
Earnings of Brown & Brown have grown 18.4% in the past five years. The expected long-term earnings growth rate is 11.7%. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 30.9% and 8.9%, respectively. BRO delivered a trailing four-quarter earnings surprise of 9.82%, on average. The consensus estimate for 2024 and 2025 earnings has moved 0.2% and 1% north, respectively, in the past 60 days. The stock has gained 47.2% year to date.
Price and Consensus: BRO
Willis Towers: Based in London, the U.K., WTW, with a market capitalization of $29.51 billion, is a leading global advisory, broking and solutions company. Growing healthcare premiums, increased consulting work and software sales, strategic buyouts, and effective capital deployment bode well for growth. Willis Towers’ growth strategy focuses on core opportunities with highest growth and returns. The broker innovated and developed its offerings in markets, and boosted its abilities in faster-growth markets.
Earnings for this insurance broker have grown 8.2% in the past five years. The Zacks Consensus Estimate for 2024 and 2025 earnings indicates year-over-year increases of 14% and 12.5%, respectively. WTW delivered a trailing four-quarter earnings surprise of 7.06%, on average. The consensus estimate for 2024 and 2025 earnings has moved 0.06% and 0.1% north, respectively, in the past 30 days. The stock has gained 20.5% year to date.
Price and Consensus: WTW