Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving the Zacks Insurance Brokerage industry. Industry players like Marsh & McLennan Companies, Inc., Aon plc, Arthur J. Gallagher & Co., Willis Towers Watson Public Limited Co. and Brown & Brown, Inc. are poised to grow from consolidations in this traditionally-fragmented industry.
Increased digitization should help the industry to improve basis points, scale and efficiencies.
About the 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 offer advice, keeping in mind clients' interests, against brokerage fees.
Their business is directly linked with clients’ level of business activity. Some of these companies are also involved in providing risk management, third-party administration and managed healthcare services.
Per a report by Mordor Intelligence, the insurance brokerage market size is anticipated at $320.55 billion in 2024 and is projected to reach $381.81 billion by 2029, at a five-year (2024-2029) CAGR of 3.56%. Per Technavio's market insights, the market size of insurance industry is projected to grow $1.40 trillion at a five-year (2023-2028) CAGR of 4.25%.
3 Trends Shaping the Future of the 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, the 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 as well as other forms of insurance. Per a report by Mordor Intelligence, the growing demand for insurance policies among people drives the growth of the insurance brokerage market. Per the report, the increased demand reflects increased awareness among customers and the importance of insurance policies.
Mergers and 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 M&A are the interest shown by private equity firms in this sector, growing competition and slow organic growth.
Increased Adoption of Technology: Industry players are focused on leveraging technology and innovation, including artificial intelligence, robotics and blockchain, to simplify and improve client experience, increase efficiencies and alter business models. Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion.
Increased automation is expected to drive premium growth and boost efficiency. However, expenses associated with such investments increase costs and, in turn, the expense ratio.
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 #108, which places it in the top 43% 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 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 top 50% of the Zacks-ranked industries is the result of a 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. The industry’s earnings estimate has moved up 3.6% for 2024 in a year.
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 Sector and S&P 500
The Insurance Brokerage industry has underperformed the Zacks Finance Sector in the past year, as well as the Zacks S&P 500 composite.
The stocks in this industry have collectively gained 10.2% compared with the S&P 500's increase of 25.1% and the broader sector’s growth of 21.2% in a year.
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 6.81X compared with the Zacks S&P 500 composite’s 8.99X and the sector’s 3.19X.
Over the past five years, the industry has traded as high as 7.98X, as low as 4.51X and at the median of 6.41X.
5 Insurance Brokerage Stocks for Better Returns
Below we present one stock from the space that currently carries a Zacks Rank #2 (Buy) and four stocks, which have a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marsh & McLennan Companies: New York-based Marsh & McLennan, with a market capitalization of $107.6 billion, provides advice and solutions to clients in the areas of risk, strategy and people worldwide. This Zacks Rank #2 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.
Marsh & McLennan delivered a four-quarter average earnings surprise of 6.53%. The Zacks Consensus Estimate for 2024 earnings indicates an 8.6% year-over-year increase. The company has a long-term earnings growth rate of 8.2%.
Aon: Dublin, Ireland-based Aon, with a market capitalization of $64.6 billion, offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. The divestiture of non-core operations to streamline its business and deepen its focus on more profitable operations generates a higher return on equity.
This, along with cost-curbing measures, bodes well for growth. Aon has an impressive inorganic story. This Zacks Rank #3 company mainly looks to expand in the health and benefits business, flood insurance solutions, and risk and insurance solution operations.
The Zacks Consensus Estimate for Aon’s 2024 earnings indicates a 9% year-over-year increase. The company has a long-term earnings growth rate of 9.8%.
Arthur J. Gallagher & Co.: Headquartered in Itasca, IL, Arthur J. Gallagher, with a market capitalization of $59.1 billion, is the world’s largest property/casualty third-party claims administrator and the fourth largest among insurance brokers (based on revenues). This Zacks Rank #3 company 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, the company expects an increase in international contribution to total revenues. New business production and retention bode well for consistent growth. AJG estimates organic growth to be between 7% and 9% in the Brokerage segment, while the same for the Risk Management segment is expected to be between 9% and 11%. Margins are expected to be around 20% in 2024.
The Zacks Consensus Estimate for AJG’s 2024 EPS indicates a 15.3% year-over-year increase. The company’s long-term earnings growth rate is 11.1%. AJG delivered a four-quarter average earnings surprise of 2.25%.
Brown & Brown: BRO, with a market capitalization of $26.5 billion and headquartered in Daytona Beach, FL, markets and sells insurance products and services primarily in the United States, as well as in 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 Zacks Rank #3 insurer.
The Zacks Consensus Estimate for BRO’s 2024 EPS indicates a 28.4% increase year over year. The long-term earnings growth rate is 10.5%. BRO delivered a four-quarter average earnings surprise of 11.90%.
Willis Towers Watson: Based in London, the United Kingdom, Willis Towers, with a market capitalization of $26.9 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 the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets.
This Zacks Rank #3 insurance broker has a solid track record of beating on earnings in three of the last four quarters and missing in one, the average surprise being 0.63%. The Zacks Consensus Estimate for 2024 earnings indicates a 12.2% year-over-year increase. The long-term earnings growth rate is 10.8%.
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Media Contact
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800-767-3771 ext. 9339
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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.
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Zacks Industry Outlook Marsh & McLennan, Aon, Arthur J. Gallagher, Willis Towers Watson and Brown & Brown
For Immediate Release
Chicago, IL – July 17, 2024 – Today, Zacks Equity Research discusses Marsh & McLennan Companies, Inc. (MMC - Free Report) , Aon plc (AON - Free Report) , Arthur J. Gallagher & Co. (AJG - Free Report) , Willis Towers Watson Public Limited Co. (WTW - Free Report) and Brown & Brown, Inc. (BRO - Free Report) .
Industry: Insurance Brokerage
Link: https://www.zacks.com/commentary/2302312/5-insurance-brokerage-picks-to-gain-from-increased-demand
Better pricing, prudent underwriting, rising demand for insurance products and global expansion have been driving the Zacks Insurance Brokerage industry. Industry players like Marsh & McLennan Companies, Inc., Aon plc, Arthur J. Gallagher & Co., Willis Towers Watson Public Limited Co. and Brown & Brown, Inc. are poised to grow from consolidations in this traditionally-fragmented industry.
Increased digitization should help the industry to improve basis points, scale and efficiencies.
About the 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 offer advice, keeping in mind clients' interests, against brokerage fees.
Their business is directly linked with clients’ level of business activity. Some of these companies are also involved in providing risk management, third-party administration and managed healthcare services.
Per a report by Mordor Intelligence, the insurance brokerage market size is anticipated at $320.55 billion in 2024 and is projected to reach $381.81 billion by 2029, at a five-year (2024-2029) CAGR of 3.56%. Per Technavio's market insights, the market size of insurance industry is projected to grow $1.40 trillion at a five-year (2023-2028) CAGR of 4.25%.
3 Trends Shaping the Future of the 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, the 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 as well as other forms of insurance. Per a report by Mordor Intelligence, the growing demand for insurance policies among people drives the growth of the insurance brokerage market. Per the report, the increased demand reflects increased awareness among customers and the importance of insurance policies.
Mergers and 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 M&A are the interest shown by private equity firms in this sector, growing competition and slow organic growth.
Increased Adoption of Technology: Industry players are focused on leveraging technology and innovation, including artificial intelligence, robotics and blockchain, to simplify and improve client experience, increase efficiencies and alter business models. Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion.
Increased automation is expected to drive premium growth and boost efficiency. However, expenses associated with such investments increase costs and, in turn, the expense ratio.
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 #108, which places it in the top 43% 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 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 top 50% of the Zacks-ranked industries is the result of a 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. The industry’s earnings estimate has moved up 3.6% for 2024 in a year.
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 Sector and S&P 500
The Insurance Brokerage industry has underperformed the Zacks Finance Sector in the past year, as well as the Zacks S&P 500 composite.
The stocks in this industry have collectively gained 10.2% compared with the S&P 500's increase of 25.1% and the broader sector’s growth of 21.2% in a year.
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 6.81X compared with the Zacks S&P 500 composite’s 8.99X and the sector’s 3.19X.
Over the past five years, the industry has traded as high as 7.98X, as low as 4.51X and at the median of 6.41X.
5 Insurance Brokerage Stocks for Better Returns
Below we present one stock from the space that currently carries a Zacks Rank #2 (Buy) and four stocks, which have a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marsh & McLennan Companies: New York-based Marsh & McLennan, with a market capitalization of $107.6 billion, provides advice and solutions to clients in the areas of risk, strategy and people worldwide. This Zacks Rank #2 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.
Marsh & McLennan delivered a four-quarter average earnings surprise of 6.53%. The Zacks Consensus Estimate for 2024 earnings indicates an 8.6% year-over-year increase. The company has a long-term earnings growth rate of 8.2%.
Aon: Dublin, Ireland-based Aon, with a market capitalization of $64.6 billion, offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. The divestiture of non-core operations to streamline its business and deepen its focus on more profitable operations generates a higher return on equity.
This, along with cost-curbing measures, bodes well for growth. Aon has an impressive inorganic story. This Zacks Rank #3 company mainly looks to expand in the health and benefits business, flood insurance solutions, and risk and insurance solution operations.
The Zacks Consensus Estimate for Aon’s 2024 earnings indicates a 9% year-over-year increase. The company has a long-term earnings growth rate of 9.8%.
Arthur J. Gallagher & Co.: Headquartered in Itasca, IL, Arthur J. Gallagher, with a market capitalization of $59.1 billion, is the world’s largest property/casualty third-party claims administrator and the fourth largest among insurance brokers (based on revenues). This Zacks Rank #3 company 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, the company expects an increase in international contribution to total revenues. New business production and retention bode well for consistent growth. AJG estimates organic growth to be between 7% and 9% in the Brokerage segment, while the same for the Risk Management segment is expected to be between 9% and 11%. Margins are expected to be around 20% in 2024.
The Zacks Consensus Estimate for AJG’s 2024 EPS indicates a 15.3% year-over-year increase. The company’s long-term earnings growth rate is 11.1%. AJG delivered a four-quarter average earnings surprise of 2.25%.
Brown & Brown: BRO, with a market capitalization of $26.5 billion and headquartered in Daytona Beach, FL, markets and sells insurance products and services primarily in the United States, as well as in 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 Zacks Rank #3 insurer.
The Zacks Consensus Estimate for BRO’s 2024 EPS indicates a 28.4% increase year over year. The long-term earnings growth rate is 10.5%. BRO delivered a four-quarter average earnings surprise of 11.90%.
Willis Towers Watson: Based in London, the United Kingdom, Willis Towers, with a market capitalization of $26.9 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 the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets.
This Zacks Rank #3 insurance broker has a solid track record of beating on earnings in three of the last four quarters and missing in one, the average surprise being 0.63%. The Zacks Consensus Estimate for 2024 earnings indicates a 12.2% year-over-year increase. The long-term earnings growth rate is 10.8%.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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.