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.
Zacks Industry Outlook Highlights: Marsh & McLennan Companies, Aon, Willis Tower Watson, Brown & Brown, and Erie Indemnity
Read MoreHide Full Article
For Immediate Release
Chicago, IL – August 31, 2021 – Today, Zacks Equity Research discusses Insurance Brokerage, including Marsh & McLennan Companies, Inc. (MMC - Free Report) , Aon plc (AON - Free Report) , Willis Towers Watson Public Limited Company , Brown & Brown, Inc. (BRO - Free Report) , and Erie Indemnity Company (ERIE - Free Report) .
Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving revenues of Zacks Insurance Brokerage industry players. Fast-paced consolidations in this traditionally fragmented industry are expected to benefit Marsh & McLennan Companies, Aon, Willis Tower Watson, Brown & Brown, and Erie Indemnity.
Increasing adoption of technology and higher spending on technology will help in faster claims processing, thus improving operational performance and increasing efficiency. This in turn ensures smooth functioning of the industry, though such huge investments increase operating costs.
About the 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 offer advice, keeping in mind clients' interests against brokerage fees. Thus, their business is directly linked with clients’ level of business.
Some of these companies are also involved in providing risk management, third-party administration, and managed health care services. Per a report by Allied Market Research, the global insurance brokerage market is projected to grow $395 billion by 2027 or at a eight-year (2020-2027) CAGR of 7.3%.
Technavio analysts forecast the global insurance brokerage market to rise by $20.52 billion or at a CAGR of 5.7% during 2021-2025 in their market research report. Increased digitization helps in improving operational results.
3 Trends Shaping the Future of Insurance Brokerage Industry
Increased Demand for Products to Drive Revenues: Industry players are continually expanding globally, cross selling products, increasing rates, tightening underwriting standards, and controlling expenses. Growth in the aging population is driving demand for retirement benefit products while the rising population of baby boomers and millennials is boosting demand for medical insurance, life insurance, accidental insurance, and other forms of insurance.
The operational results of the industry players are affected directly by clients’ level of business activity, which, in turn, depends on the extent of economic activity in the industries and markets that they serve. Though the industry was hit by the pandemic, reopening of the economy, increased vaccination and improved economic growth estimates instill confidence.
Mergers and Acquisitions: The insurance brokerage industry is witnessing fast-paced consolidation. The industry has been traditionally fragmented with a number of small players. One of the factors driving mergers and acquisitions is the need of the companies to become specialized in their businesses. Some other factors driving M&A are the interest shown by private equity firms in this sector, growing competition, and lack of organic growth.
Increased Adoption of Technology: To maintain competitiveness in the industry, players are embracing technological change. The threat comes from new entrants, including technology companies like Insurtech, start-ups, and others.
These players are focused on using technology and innovation, including artificial intelligence, robotics and blockchain to simplify and improve client experience, increase efficiencies, alter business models and bring about other disruptive changes in industries in which the existing players operate. Increased digitization will help in faster claims processing, thus improving operational performance.
Per a WNS report, global spending on technology is estimated to increase 48% on a compound annual growth basis to $1.4 billion by 2021. While investments in technology help increase business efficiency, the expenses associated with such investments increase operating costs.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Insurance - Brokerage industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #50, which places it in the top 20% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, signifies solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive 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.
Before we present a few insurance broker stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Underperforms Both S&P and Sector
The Insurance Brokerage industry has underperformed both the Zacks Finance Sector and the Zacks S&P 500 composite over the past year.
The industry has gained 14.5% compared with the S&P 500's increase of 30.2% and the broader sector’s rally of 39.8% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 5.08X compared with the S&P 500's 7.03X and the sector's 3.36X.
Over the last five years, the industry has traded as high as 6.85X, as low as 3.64X and at the median of 5.03X.
Brown & Brown: This Daytona Beach, FL based company markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. The company is poised to benefit from strategic acquisitions and mergers as well as investments to boost organic growth and expand margin.
It beat estimates in each of the last four reported quarters with the average beat being 21.40%. The Zacks Consensus Estimate for 2021 and 2022 EPS indicates a respective increase of 24.6% and 5.8% year over year. The consensus estimates for 2021 and 2022 have moved 5.6% and 3.8% north in the past 60 days.
Marsh & McLennan Companies: This New York-based company provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. This company is well poised to grow on significant investments and acquisitions made within its operating units, launch of products, enhanced digital capabilities, and new businesses.
It delivered a four-quarter average surprise of 13.88%. The Zacks Consensus Estimate for 2021 and 2022 earnings indicates 22.1% and 8.1% year-over-year increase, respectively. The consensus estimates for 2021 and 2022 have moved 7.8% and 7.2% north in the past 60 days. The expected long-term earnings growth rate is pegged at 12.5%, better than the industry average of 11.5%.
Aon plc: Headquartered in London, this British multinational corporation offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. Divestiture of its non-core operations to streamline its business and focus on more profitable operations, thereby generating higher return on equity; strengthening of its position in the evolving commercial insurance market for small and medium-sized businesses, and cost savings from its restructuring programs bode well for growth.
This company delivered an average earnings surprise of 1.12% in the trailing four quarters. The Zacks Consensus Estimate for 2021 and 2022 indicates respective year-over-year increases of 18.8% and 10.1%. The consensus estimates for 2021 and 2022 have moved 4.4% and 3.8% north in the past 30 days.
Willis Towers Watson: This London-based leading global advisory, broking and solutions company should benefit from increasing organic commissions and fees, solid customer retention levels, and growing new business.
The company delivered an average earnings surprise of 13.52% in the trailing four quarters. The Zacks Consensus Estimate for current-year and 2022 earnings has been revised 5.8% and 5.7% upward, respectively over the past 60 days, indicating 15.7% and 8.8% year-over-year increase.
Investors can also keep a watch on stocks that currently carry Zacks Rank #3 (Hold), such as:
Erie Indemnity Company: Erie, PA Erie Indemnity Company operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. It provides sales, underwriting, policy issuance, and renewal services for the policyholders on behalf of Erie Insurance Exchange. This company should continue to benefit from strong growth in renewal business, focus on expanding agency force, and growth of its customer base.
The Zacks Consensus Estimate for 2021 and 2022 earnings indicates a respective year-over-year increase of 3.7% and 8.8%. It delivered a four-quarter average earnings surprise of 3.43%.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights: Marsh & McLennan Companies, Aon, Willis Tower Watson, Brown & Brown, and Erie Indemnity
For Immediate Release
Chicago, IL – August 31, 2021 – Today, Zacks Equity Research discusses Insurance Brokerage, including Marsh & McLennan Companies, Inc. (MMC - Free Report) , Aon plc (AON - Free Report) , Willis Towers Watson Public Limited Company , Brown & Brown, Inc. (BRO - Free Report) , and Erie Indemnity Company (ERIE - Free Report) .
Link: https://www.zacks.com/commentary/1788593/6-brokerage-stocks-making-the-most-of-the-rising-demand-for-insurance
Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving revenues of Zacks Insurance Brokerage industry players. Fast-paced consolidations in this traditionally fragmented industry are expected to benefit Marsh & McLennan Companies, Aon, Willis Tower Watson, Brown & Brown, and Erie Indemnity.
Increasing adoption of technology and higher spending on technology will help in faster claims processing, thus improving operational performance and increasing efficiency. This in turn ensures smooth functioning of the industry, though such huge investments increase operating costs.
About the 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 offer advice, keeping in mind clients' interests against brokerage fees. Thus, their business is directly linked with clients’ level of business.
Some of these companies are also involved in providing risk management, third-party administration, and managed health care services. Per a report by Allied Market Research, the global insurance brokerage market is projected to grow $395 billion by 2027 or at a eight-year (2020-2027) CAGR of 7.3%.
Technavio analysts forecast the global insurance brokerage market to rise by $20.52 billion or at a CAGR of 5.7% during 2021-2025 in their market research report. Increased digitization helps in improving operational results.
3 Trends Shaping the Future of Insurance Brokerage Industry
Increased Demand for Products to Drive Revenues: Industry players are continually expanding globally, cross selling products, increasing rates, tightening underwriting standards, and controlling expenses. Growth in the aging population is driving demand for retirement benefit products while the rising population of baby boomers and millennials is boosting demand for medical insurance, life insurance, accidental insurance, and other forms of insurance.
The operational results of the industry players are affected directly by clients’ level of business activity, which, in turn, depends on the extent of economic activity in the industries and markets that they serve. Though the industry was hit by the pandemic, reopening of the economy, increased vaccination and improved economic growth estimates instill confidence.
Mergers and Acquisitions: The insurance brokerage industry is witnessing fast-paced consolidation. The industry has been traditionally fragmented with a number of small players. One of the factors driving mergers and acquisitions is the need of the companies to become specialized in their businesses. Some other factors driving M&A are the interest shown by private equity firms in this sector, growing competition, and lack of organic growth.
Increased Adoption of Technology: To maintain competitiveness in the industry, players are embracing technological change. The threat comes from new entrants, including technology companies like Insurtech, start-ups, and others.
These players are focused on using technology and innovation, including artificial intelligence, robotics and blockchain to simplify and improve client experience, increase efficiencies, alter business models and bring about other disruptive changes in industries in which the existing players operate. Increased digitization will help in faster claims processing, thus improving operational performance.
Per a WNS report, global spending on technology is estimated to increase 48% on a compound annual growth basis to $1.4 billion by 2021. While investments in technology help increase business efficiency, the expenses associated with such investments increase operating costs.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Insurance - Brokerage industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #50, which places it in the top 20% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, signifies solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive 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.
Before we present a few insurance broker stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Underperforms Both S&P and Sector
The Insurance Brokerage industry has underperformed both the Zacks Finance Sector and the Zacks S&P 500 composite over the past year.
The industry has gained 14.5% compared with the S&P 500's increase of 30.2% and the broader sector’s rally of 39.8% in the said time frame.
Industry's Current Valuation
On the basis of the trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 5.08X compared with the S&P 500's 7.03X and the sector's 3.36X.
Over the last five years, the industry has traded as high as 6.85X, as low as 3.64X and at the median of 5.03X.
5 Insurance Brokerage Stocks to Keep an Eye On
We are presenting four stocks from the space currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brown & Brown: This Daytona Beach, FL based company markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. The company is poised to benefit from strategic acquisitions and mergers as well as investments to boost organic growth and expand margin.
It beat estimates in each of the last four reported quarters with the average beat being 21.40%. The Zacks Consensus Estimate for 2021 and 2022 EPS indicates a respective increase of 24.6% and 5.8% year over year. The consensus estimates for 2021 and 2022 have moved 5.6% and 3.8% north in the past 60 days.
Marsh & McLennan Companies: This New York-based company provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. This company is well poised to grow on significant investments and acquisitions made within its operating units, launch of products, enhanced digital capabilities, and new businesses.
It delivered a four-quarter average surprise of 13.88%. The Zacks Consensus Estimate for 2021 and 2022 earnings indicates 22.1% and 8.1% year-over-year increase, respectively. The consensus estimates for 2021 and 2022 have moved 7.8% and 7.2% north in the past 60 days. The expected long-term earnings growth rate is pegged at 12.5%, better than the industry average of 11.5%.
Aon plc: Headquartered in London, this British multinational corporation offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. Divestiture of its non-core operations to streamline its business and focus on more profitable operations, thereby generating higher return on equity; strengthening of its position in the evolving commercial insurance market for small and medium-sized businesses, and cost savings from its restructuring programs bode well for growth.
This company delivered an average earnings surprise of 1.12% in the trailing four quarters. The Zacks Consensus Estimate for 2021 and 2022 indicates respective year-over-year increases of 18.8% and 10.1%. The consensus estimates for 2021 and 2022 have moved 4.4% and 3.8% north in the past 30 days.
Willis Towers Watson: This London-based leading global advisory, broking and solutions company should benefit from increasing organic commissions and fees, solid customer retention levels, and growing new business.
The company delivered an average earnings surprise of 13.52% in the trailing four quarters. The Zacks Consensus Estimate for current-year and 2022 earnings has been revised 5.8% and 5.7% upward, respectively over the past 60 days, indicating 15.7% and 8.8% year-over-year increase.
Investors can also keep a watch on stocks that currently carry Zacks Rank #3 (Hold), such as:
Erie Indemnity Company: Erie, PA Erie Indemnity Company operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. It provides sales, underwriting, policy issuance, and renewal services for the policyholders on behalf of Erie Insurance Exchange. This company should continue to benefit from strong growth in renewal business, focus on expanding agency force, and growth of its customer base.
The Zacks Consensus Estimate for 2021 and 2022 earnings indicates a respective year-over-year increase of 3.7% and 8.8%. It delivered a four-quarter average earnings surprise of 3.43%.
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.