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Zacks Industry Outlook Highlights: Marsh & McLennan Companies, Arthur J. Gallagher, Willis Tower Watson plc, Brown & Brown and Ryan Specialty Group Holdings
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For Immediate Release
Chicago, IL – January 11, 2022 – Today, Zacks Equity Research discusses Marsh & McLennan Companies (MMC - Free Report) , Arthur J. Gallagher (AJG - Free Report) , Willis Tower Watson plc , Brown & Brown (BRO - Free Report) and Ryan Specialty Group Holdings (RYAN - Free Report) .
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, Arthur J. Gallagher, Willis Tower Watson plc, Brown & Brown and Ryan Specialty Group Holdings.
Increasing adoption of technology and higher spending on technology will help in the smooth functioning of the industry.
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 activity. 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 an 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 performance.
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 new COVID-19 virus variants continue to raise concern, increased vaccination and awareness, and economic growth instill confidence. Per Deloitte Insights, The Swiss Re Institute projects an increase in demand for insurance, which, in turn, will drive a 3.9% increase in premiums in 2022.
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 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 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.
Digitalization has increased with companies gathering strength to operate amid pandemic-induced restrictions. Increased digitization will help in faster claims processing, thus improving operational performance. 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 #69, which places it in the top 27% 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. The industry’s earnings estimate for the current year has moved up 4.8% in a year’s time.
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 Outperforms Both S&P and Sector
The Insurance Brokerage industry has outperformed both the Zacks Finance Sector and the Zacks S&P 500 composite over the past year.
The industry has gained 26.5% compared with the S&P 500's increase of 23.8% and the broader sector’s rally of 22.2% 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 6.72X compared with the S&P 500's 7.16X and the sector's 3.45X.
Over the last five years, the industry has traded as high as 7.11X, as low as 4.19X and at the median of 5.03X.
Ryan Specialty Group: Chicago, IL-based Ryan Specialty is a service provider of specialty products and solutions for insurance brokers, agents, and sports a Zacks Rank #1. This second-largest U.S. P&C wholesale broker should benefit from its comprehensive product portfolio, solid pricing in the excess and supply (E&S) market and strategic mergers and acquisitions.
The Zacks Consensus Estimate for Ryan Specialty’s 2022 EPS indicates an increase of 13.6% year over year. The consensus estimate has moved north by a cent in the past seven days.
Brown & Brown: Daytona Beach, FL-based Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. This Zacks Rank #2 company is poised to benefit from strategic acquisitions and mergers as well as investments to boost organic growth and expand margin.
Brown & Brown beat estimates in each of the last four reported quarters with the average beat being 18.33%. The Zacks Consensus Estimate for 2022 EPS indicates an increase of 5.1% year over year. It has moved north by a cent in the past 30 days.
Marsh & McLennan Companies: New York-based Marsh & McLennan provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. This Zacks Rank #2 company is well poised to grow on significant investments and acquisitions made within its operating units, the launch of products, enhanced digital capabilities, and new businesses.
Marsh & McLennan delivered a four-quarter average earnings surprise of 13.45%. The Zacks Consensus Estimate for 2022 earnings indicates a 9.5% year-over-year increase and has moved 0.4% north in the past seven days. The expected long-term earnings growth rate is pegged at 12.9%, better than the industry average of 12.6%.
Willis Towers Watson.: London-based leading global advisory, broking and solutions company, Willis Towers Watson should benefit from increasing organic commissions and fees, solid customer retention levels, and growing new business.
The Zacks Rank #2 insurance broker delivered an average earnings surprise of 15.27% in the trailing four quarters. The Zacks Consensus Estimate for Willis Towers Watson’s 2022 earnings indicates a 5.9% year-over-year increase.
Investors can also keep a tab of a stock that currently carries a Zacks Rank #3 (Hold).
Arthur J. Gallagher: Rolling Meadows, IL-based Arthur J. Gallagher provides insurance brokerage, consulting, and third-party claims settlement and administration services in the United States, Australia, Bermuda, Canada, the Caribbean, New Zealand, and the United Kingdom. It should gain from organic growth at its Brokerage and Risk Management segments.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 EPS indicates a 10.8% increase year over year, having moved up by a cent over the past 30 days. AJG delivered an earnings surprise in each of the last four reported quarters with the average being 10.99%. The expected long-term earnings growth rate is pegged at 12.2%.
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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.
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Zacks Industry Outlook Highlights: Marsh & McLennan Companies, Arthur J. Gallagher, Willis Tower Watson plc, Brown & Brown and Ryan Specialty Group Holdings
For Immediate Release
Chicago, IL – January 11, 2022 – Today, Zacks Equity Research discusses Marsh & McLennan Companies (MMC - Free Report) , Arthur J. Gallagher (AJG - Free Report) , Willis Tower Watson plc , Brown & Brown (BRO - Free Report) and Ryan Specialty Group Holdings (RYAN - Free Report) .
Industry: Insurance Brokerage
Link: https://www.zacks.com/commentary/1849670/5-insurance-brokers-that-continue-to-benefit-from-increasing-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, Arthur J. Gallagher, Willis Tower Watson plc, Brown & Brown and Ryan Specialty Group Holdings.
Increasing adoption of technology and higher spending on technology will help in the smooth functioning of the industry.
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 activity. 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 an 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 performance.
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 new COVID-19 virus variants continue to raise concern, increased vaccination and awareness, and economic growth instill confidence. Per Deloitte Insights, The Swiss Re Institute projects an increase in demand for insurance, which, in turn, will drive a 3.9% increase in premiums in 2022.
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 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 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.
Digitalization has increased with companies gathering strength to operate amid pandemic-induced restrictions. Increased digitization will help in faster claims processing, thus improving operational performance. 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 #69, which places it in the top 27% 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. The industry’s earnings estimate for the current year has moved up 4.8% in a year’s time.
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 Outperforms Both S&P and Sector
The Insurance Brokerage industry has outperformed both the Zacks Finance Sector and the Zacks S&P 500 composite over the past year.
The industry has gained 26.5% compared with the S&P 500's increase of 23.8% and the broader sector’s rally of 22.2% 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 6.72X compared with the S&P 500's 7.16X and the sector's 3.45X.
Over the last five years, the industry has traded as high as 7.11X, as low as 4.19X and at the median of 5.03X.
5 Insurance Brokerage Stocks to Keep an Eye On
We are presenting one stock from the space currently carrying a Zacks Rank #1 (Strong Buy) and three Zacks Rank #2 (Buy) stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ryan Specialty Group: Chicago, IL-based Ryan Specialty is a service provider of specialty products and solutions for insurance brokers, agents, and sports a Zacks Rank #1. This second-largest U.S. P&C wholesale broker should benefit from its comprehensive product portfolio, solid pricing in the excess and supply (E&S) market and strategic mergers and acquisitions.
The Zacks Consensus Estimate for Ryan Specialty’s 2022 EPS indicates an increase of 13.6% year over year. The consensus estimate has moved north by a cent in the past seven days.
Brown & Brown: Daytona Beach, FL-based Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. This Zacks Rank #2 company is poised to benefit from strategic acquisitions and mergers as well as investments to boost organic growth and expand margin.
Brown & Brown beat estimates in each of the last four reported quarters with the average beat being 18.33%. The Zacks Consensus Estimate for 2022 EPS indicates an increase of 5.1% year over year. It has moved north by a cent in the past 30 days.
Marsh & McLennan Companies: New York-based Marsh & McLennan provides advice and solutions to clients in the areas of risk, strategy, and people worldwide. This Zacks Rank #2 company is well poised to grow on significant investments and acquisitions made within its operating units, the launch of products, enhanced digital capabilities, and new businesses.
Marsh & McLennan delivered a four-quarter average earnings surprise of 13.45%. The Zacks Consensus Estimate for 2022 earnings indicates a 9.5% year-over-year increase and has moved 0.4% north in the past seven days. The expected long-term earnings growth rate is pegged at 12.9%, better than the industry average of 12.6%.
Willis Towers Watson.: London-based leading global advisory, broking and solutions company, Willis Towers Watson should benefit from increasing organic commissions and fees, solid customer retention levels, and growing new business.
The Zacks Rank #2 insurance broker delivered an average earnings surprise of 15.27% in the trailing four quarters. The Zacks Consensus Estimate for Willis Towers Watson’s 2022 earnings indicates a 5.9% year-over-year increase.
Investors can also keep a tab of a stock that currently carries a Zacks Rank #3 (Hold).
Arthur J. Gallagher: Rolling Meadows, IL-based Arthur J. Gallagher provides insurance brokerage, consulting, and third-party claims settlement and administration services in the United States, Australia, Bermuda, Canada, the Caribbean, New Zealand, and the United Kingdom. It should gain from organic growth at its Brokerage and Risk Management segments.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 EPS indicates a 10.8% increase year over year, having moved up by a cent over the past 30 days. AJG delivered an earnings surprise in each of the last four reported quarters with the average being 10.99%. The expected long-term earnings growth rate is pegged at 12.2%.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>
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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.