Rainier Posted May 1, 2025 Posted May 1, 2025 1 hour ago, Spekulatius said: I would be careful with ERIE. the total combined ratio business they wrote on the exchange is pretty bad. They shows this data only in the supplements This is probably not sustainable. ERIE either need to be more selective in underwriting or lowering ERIE‘s 25% fee or both. In any case, ERIE‘s results will suffer. ERIE is a great business as they are not directly underwrite the risk and just charging fees proportional to the volumes. It‘s similar to the GP/LP structure. Yeah, I got enamored with the nature of the business and the captive fee. But didn’t research the quality of the related insurance exchange. Thanks for the insight. I sold it today without much of a loss. I’m glad I posted about it.
longterminvestor Posted May 13, 2025 Posted May 13, 2025 Don't fall asleep reading 145 pages of WTW's "Price Predictions". If you not gonna read the whole thing, the cliff notes are: - individual sectors of the insurance market and how they price differently - each line of business has no correlation - complicated nature of the market and need a broker to navigate (For example, I can think a a handful of accounts who do $25M in revenue that touch 10-12 of these markets through 1 owner/CEO making the final decision.) Maybe WTW just throws this at a client to say "You see how hard this is?" in reality client will just stay with incumbent carriers. I am working on an Erie post as well, might as well post my commitment so you all can hold me to finishing - NERD Alert. insurance-marketplace-realities-2025-spring-update-v2.pdf
lnofeisone Posted May 13, 2025 Posted May 13, 2025 1 hour ago, longterminvestor said: Don't fall asleep reading 145 pages of WTW's "Price Predictions". If you not gonna read the whole thing, the cliff notes are: - individual sectors of the insurance market and how they price differently - each line of business has no correlation - complicated nature of the market and need a broker to navigate (For example, I can think a a handful of accounts who do $25M in revenue that touch 10-12 of these markets through 1 owner/CEO making the final decision.) Maybe WTW just throws this at a client to say "You see how hard this is?" in reality client will just stay with incumbent carriers. I am working on an Erie post as well, might as well post my commitment so you all can hold me to finishing - NERD Alert. insurance-marketplace-realities-2025-spring-update-v2.pdf 12.66 MB · 3 downloads It's a conversation starter. In the same way Deloitte does Tech Trends and PWC does M&A reports. The goal is to get in and get conversation #1. After that it becomes about personalities and relationships and only after that does it become nerd alert and detail-oriented number crunching.
MungerWunger Posted June 10, 2025 Posted June 10, 2025 Large acquisition for Brown & Brown: Under the terms of the agreement, Brown & Brown will acquire RSC on a cash and debt-free basis at the time of acquisition for a gross purchase price of $9.825 billion https://www.globenewswire.com/news-release/2025/06/10/3096453/0/en/Brown-Brown-Inc-enters-into-agreement-to-acquire-Accession-Risk-Management-Group.html
thowed Posted June 10, 2025 Posted June 10, 2025 Big Acquisition for BRO! https://www.reinsurancene.ws/brown-brown-to-acquire-risk-strategies-one80-parent-accession/ I suspect @longterminvestor will have a better take on this than me. But at first glance looks like they're buying a good company for a high price. Market doesn't seem too bothered though.
dwy000 Posted June 10, 2025 Posted June 10, 2025 The articles suggest this has been in the works for a long time and has already cleared HSR which may be why the reaction is so muted. Definitely a full price for $1.7bn of revenues but there can't be many purchases of this size out there in one fell swoop. @longterminvestor, what's your view of Ascension and how it fits with Brown? They seem to be doing a full restructuring of the wholesale business at the same time.
gfp Posted June 13, 2025 Posted June 13, 2025 I noticed this substack article today. It should be free to read. Nothing new here but it is a broad overview of the industry. Might be interesting to some here. Learning about the insurance brokerage business can be good for your bottom line! https://redwoodcapital.substack.com/p/the-unassuming-moneymaker-a-peek?r=8i9o6&utm_campaign=post&utm_medium=web&triedRedirect=true
Malmqky Posted June 13, 2025 Posted June 13, 2025 Just now, gfp said: I noticed this substack article today. It should be free to read. Nothing new here but it is a broad overview of the industry. Might be interesting to some here. Learning about the insurance brokerage business can be good for your bottom line! https://redwoodcapital.substack.com/p/the-unassuming-moneymaker-a-peek?r=8i9o6&utm_campaign=post&utm_medium=web&triedRedirect=true Thanks, will read. I'm currently reading through this thread and may find the answer to my questions shortly. Or maybe they're obvious. But what is the best way to value insurance brokers? And has anything fundamentally shifted recently that would make comparing valuation now to historic valuation foolish?
dealraker Posted June 13, 2025 Posted June 13, 2025 Just following the 30 year model LOL! My first BRO shares are 31 years held now. 06/11/2025 Buy 1,000 BROPopup BROWN AND BROWN INC COM @ $103.6850
dealraker Posted June 13, 2025 Posted June 13, 2025 Prior to the above: 04/25/2025 Buy 1,000 AONPopup AON PLC SHS CL A @ $330.7950 Aon is the broker I have the least of but the fall after earnings may have offered a decent price. I also bought Wyllis again: 04/25/2025 Buy 500 WTWPopup WILLIS TOWERS WATSON PUB LTD CO @ $297.7850 These are stocks I plan to hold.
dealraker Posted June 13, 2025 Posted June 13, 2025 AJG is my largest holding, held since 1994: AJGpopup Action for symbol AJG in account SINK CMA-Edge 5F4-17Q83 GALLAGHER ARTHUR J & CO 62,500 $318.06Last updated at01:28 PM ET -$2.09 -0.65%
longterminvestor Posted June 13, 2025 Posted June 13, 2025 Thoughts from news and conference call. Significant buy from BRO. Accession (#9 world wide in distribution) is a big business. Accession, a PE Backed roll up, is the entity however the names in trade is Risk Strategies/One80 (RS/180). BRO knows the majority of the businesses acquired by RS/180 well - BRO has competed against these businesses for accounts or courted them for the acquisition and got outbid or seller went with RS/180 for their reasons. Its an acquisition breaking BRO into top 5 brokers world wide. BRO will consolidate into 2 divisions - Retail & Specialty (combining Programs and Wholesale) – speculation because it provides less insight into business from competitors and there could be some insurance carrier reasons as well. As of 2024, BRO has roughly $2.7B of Retail sales & roughly $2B of Specialty sales. RS (retail) is roughly $1.2B sales & 180 (Specialty) is $500M. That's a 45% increase in Retail sales and a 25% increase in Specialty. Represents a 36% increase in total revenues for BRO going from $4.7B to $6.4B. BRO is obviously keeping up with the arms race of large acquisitions to stay in the game. At $9.825B Price on $600M of EBITDA, 16.375X EBITDA or 5.77X Topline – these are elevated multiples from previously announced acquisitions in Insurance Distribution of similar size however BRO is making a splash here. $1B-$2B Revenue Brokers is rare air, $2B+ is less rare with more players however majority are “Not for Sale”. $1B-$2B Billion revenue club has 5 members going to 4 now that Accession is part of BRO (1 Public, 3* PE Backed & 1 with Permanent Capital)-*now 2 PE Backed. $2B+ Billion revenue club has 11 members going to 10 (5 Public, 4* PE Backed, 1 Permanent Capital, 1 Private) - *1 PE Backed player is already under acquisition, AJG buying AssuredPartners,– some speculate AJG/AP may see regulatory hang up calling it dead but the news will be interesting to follow. Overall, PE Backed brokers have loaded up with debt and are reaching end of life with rates increasing and refinancing imminent. BRO tried to buy HUB (Now #7 overall) maybe 10 years ago – both firms were roughly the same size at that time. BRO could not land the plane or HUB got spooked (doesn’t matter what happened, both firms have continued to prosper). Point being BRO has been at the table before considering a significant deal in scope. This time, Mr. Brown and team, were able to consummate the deal. BRO will have to issue $4B of equity to swallow this – RS/180 folks will taking 14% of purchase in stock as well with a lock up period – continues the culture BRO is perpetuating as a “Team Mate Owned Firm”. Going from 286M shares outstanding to 326M shares, increasing shares outstanding by 14%. I don’t know if the equity issued to seller is inside that or additional and if one was truly curious its in the filings somewhere. Debt levels will be manageable due to the huge cash flows provided by enterprise. BRO has seen these levels previously in terms of % with previous large deals consummated and has been able to get under control/manageable. CFO Andy Watts touted recent credit upgrades from Fitch/Moodys to BBB or equivalent. Interesting side note regarding debt, BRO & Accession as of March 31,2025 had $3.731B and $4.574B of long-term debt respectively. Let that sink in. BRO with market cap of $30B and $4.7B revenue (pre acquisition) had $3.7B of Leverage and Accession at $10B val with $1.7B of revenue had $4.5B debt! Seems like the PE sponsor needed to pay their debt rather than run a great business. Win for BRO and so goes the long saga of insurance brokerage growth. The train continues down the track.
dealraker Posted June 13, 2025 Posted June 13, 2025 (edited) Note: I post the Wells Fargo notes on the brokers simply because for years and years it has been as accurate as I think humanly possible. Wells Fargo on BRO and acquisition: Insurance Brokers Brown & Brown, Inc. Joining the Broker M&A Party; Updating Numbers for Accession Deal Overweight Price Target: $127.00 Our Call We update our estimates and price target for the Accession deal. Our 2026 EPS goes up by 6%, with 2027 rising by 8%. Shares now trade at 21.7x our 2026 EPS estimate and are more attractive with the accretion coming from the deal. 2026/2027 estimates and price target go higher: Our 2025, 2026 and 2027 EPS estimates go to $4.07, $4.82 and $5.25 from $4.20, $4.52 and $4.85 incoporating Accession deal. We assume 5% growth in revenue each year and build in revenue synergies starting in 2026 (tying to BRO's guide); our accretion broadly ties to what we outlined post conf call (note). 2025 goes down to incorporate in financing costs prior to deal close (assume mid Q3 close). Price target to $127 (from $125) on ~26x 2026 EPS. Overall view on the deal: This deal gives BRO greater presence in the middle-market in the US. Further, they got a good price (15.4x adjusted EBITDA and 12.3x when also including synergies) and will see the transaction immediately be accretive to EPS (there is modest dilution in 2025 as they raised the financing and are waiting for the deal to close and also said most of the synergies will come staring in 2026). The deal will close pretty soon (expected in Q3 2025) with BRO already clearing HSR. Comparison to prior broker large deals: Below we show how BRO deal compares to recent large deals announced by AJG, AON and MMC. AJG is paying a lower multiple for AssuredPartners but has a lengthier regulatory process due to second request from the DOJ and has pushed back its deal close from Q1 2025 to Q4 2025. BRO's multiple is higher than AJG but lower than those paid by MMC (for McGriff) and AON (for NFP). The Accession business is running at a higher margin than others, prior to synergies. Exhibit 1 - Comparison Of Large Broker Deals AON/NFP MMC/McGriff AJG/AssuredPartners BRO/Accession Date Announced 12/20/2023 9/30/2024 12/9/2024 6/10/2025 Date Closed 4/25/2024 11/15/2024 Expected Q4 2025 Expected Q3 2025 Price Paid $13.4B $7.75B $13.45B $9.825B Financing $7B Debt, $6.4B AON Shares $500M Cash, $7.25B Debt Cash, Debt, $8.5B Equity $5.3B Equity, $4B Debt, Cash Revenue $2.2B $1.3B $2.9B $1.7B EBITDA $600M $350M $938M $600M Revenue Multiple 6.1x 5.6x 4.3x 5.4x EBITDA Multiple 22.3x 20.7x 13.3x 15.4x Year 1 Accretion Dilutive Modestly Accretive 8.5-10% 5-8% Year 2 Accretion Breakeven More Meaningfully Accretive - - Organic 6% Not Disclosed 6% Similar to BRO Margin 21.6% 26.9% 32.3% 35.0% Synergies $235m over long-term None Disclosed $160m over 12 months $150m over 3 years Source: Company reports and Wells Fargo Securities, LLC Valuation more favorable post deal: BRO shares are trading at 21.7x updated 2026 number (versus 23.9x on Monday using our old EPS estimate) and 16.2x on an EV to EBITDA basis versus 17.5x before. The accretion from the deal makes the shares seem more attractive relative to historical levels (5-year average price to earnings multiple is 24.9x with a high of 30.6x). The combination of the move down in the shares this week plus the accretion from the deal makes the valuation screen more attractive. Notable Changes $ (Dec) Current Prior % Chg Price Target $127.00 $125.00 1.6% EPS 2025 4.07 4.20 -3.0% EPS 2026 4.82 4.52 6.5% Rev. (MM) 2025 5.88B 5.20B 13.0% Rev. (MM) 2026 7.39B 5.53B 33.8% Ticker BRO Upside/(Downside) to Target 21.6% Price (06/11/2025) $104.48 52 Week Range $88.31 - 125.68 Market Cap (MM) $29,777 Enterprise Value (MM) $32,926 Average Daily Value (MM) $221 Dividend Yield 0.5% $ (Dec) Q1 Q2 Q3 Q4 FY EPS 2025E 1.29 A 0.95 E 0.88 E 0.99 E 4.07 E Prior NC 1.01 E 0.97 E 0.93 E 4.20 E 2026E 1.46 E 1.15 E 1.12 E 1.09 E 4.82 E Prior 1.40 E 1.09 E 1.04 E 1.00 E 4.52 E 2027E 1.61 E 1.26 E 1.19 E 1.20 E 5.25 E Prior 1.50 E 1.16 E 1.11 E 1.07 E 4.85 E Source: Company Data, Wells Fargo Securities estimates, and Factset. NA = Not Available, NC = No Change, NE = No Estimate Elyse Greenspan, CFA Equity Analyst | Wells Fargo Securities, LLC Hristian Getsov Associate Equity Analyst | Wells Fargo Securities, LLC Nicholas Annitto Associate Equity Analyst | Wells Fargo Securities, LLC Westar Zong Associate Equity Analyst | Wells Fargo Securities, LLC AJGpopup Action for symbol AJG in account SINK CMA-Edge 5F4-17Q83 GALLAGHER ARTHUR J & CO 62,500 $318.06Last updated at01:28 PM ET -$2.09 -0.65% Edited June 13, 2025 by dealraker
dealraker Posted June 13, 2025 Posted June 13, 2025 Wells on Bro 2nd page: Wells Fargo Express Takeaways Brown & Brown, Inc. (BRO) | Rating: Overweight | Price Target: $127.00 Analyst: Elyse Greenspan Financials FY (Dec) 2025E 2026E 2027E $ ESTIMATES EPS Q1 1.29 A 1.46 E 1.61 E Q2 0.95 E 1.15 E 1.26 E Q3 0.88 E 1.12 E 1.19 E Q4 0.99 E 1.09 E 1.20 E AN 4.07 E 4.82 E 5.25 E Rev. (MM) 5.88B E 7.39B E 7.84B E FCF (MM) 1,153.9 E 1,747.7 E 1,892.2 E EBIT (MM) 1,688.9 E 2,146.4 E 2,335.0 E EBITDA (MM) 2.06B E 2.65B E 2.85B E Organic Growth (%) 5.4% E 5.2% E 5.0% E WELLS FARGO vs. CONSENSUS Consensus Estimate 4.17 E 4.53 E 5.01 E Difference from Consensus 6.3% 4.8% VALUATION P/E 25.7x 21.7x 19.9x EV/Revenue 5.6x 4.5x 4.2x EV/FCF 28.5x 18.8x 17.4x FCF Yield 3.9% 5.9% 6.4% EV/EBIT 19.5x 15.3x 14.1x EV/EBITDA 16.0x 12.4x 11.6x Consensus Estimate: EPS; Source: FactSet Source: Company Data, Wells Fargo Securities estimates, and Factset. NA = Not Available, NE = No Estimate Investment Thesis BRO is looking for 2025 margins to remain at 2024 levels, while they also expect to see low- to mid-single-digit organic growth in a steady-state economy. BRO shares are more attractive as street numbers factor in the accretion from the Accession deal. We rate BRO shares Overweight. Risk vs. Reward – Upside/Downside Price Target Scenarios $76 $101 $126 $151 $176 Upside Scenario Base Case Downside Scenario * $104.48 $147.00 $127.00 $95.00 *As of 06/11/25 Source: Wells Fargo Securities, LLC estimates and Factset. Base Case | $127.00 • Our price target of $127 is based on a 26.3x multiple of our 2026 adjusted cash EPS estimate. • The 26.3x multiple is a blend of the 5- year average (75% weighting) and the peak multiple (25% weighting). BRO pulled intangible amortization out of its EPS on its Q4 2023 conference call, so historical levels are not comparable. Upside Scenario | $147.00 • Our upside scenario is $147 and assumes a multiple of 30.6x our FY26 adjusted EPS estimate. • The 30.6x is its 5-year peak multiple. • Our upside scenario is primarily valuation based, but also captures the potential for stronger organic and margin expansion, which would likely result in upward revisions to our estimates and price target. Downside Scenario | $95.00 • Our downside scenario is $95 and assumes a multiple of 19.8x our adjusted FY26 EPS estimate. • The 19.8x is its 5-year low multiple. • Our lower valuation multiple is based upon the potential for an economic downturn causing a slowdown in P&C pricing, slower organic growth, and margin improvement falling short of
dealraker Posted June 13, 2025 Posted June 13, 2025 Lastly Wells on Bro: What else: This follows a wave of consolidation in the brokerage space with all big brokers but WTW in the midst of larger deals. While typically it has worked to avoid investing in brokers bringing on large deals, we believe the narrative has changed given abundance of deals. One source of debate has been whether Accession can get to 43% margin (with synergies) given higher starting point (35%) as synergies (1.1% of revenue and 11.6% of expense) seem reasonable to us and vs other broker deals. Exhibit 2 - Modeled Deal Synergies on Large Brokerage Transactions Deal Savings % of Acquired Expenses Revenue Synergies % of Acquired Revenues Commentary AON/NFP 60 3.5% 175 8.0% MMC/JLT 350 20.7% Modeled dis-synergies 0.0% Savings were initially $250m AJG/AP 100 4.9% 60 2.0% BRO/Accession 130 11.6% 20 1.2% Average - 10.2% - 2.8% -
Junior R Posted June 30, 2025 Posted June 30, 2025 looking to add small amount whats better long term bet BRO or AJG
Spekulatius Posted July 21, 2025 Posted July 21, 2025 Added to $BRO. As is often the case, the secondary offering price ($102 ) acts as a magnet to the share price, so I added some around $103. $BRO is actually fairly reasonable valued around 21x 2026 cash earnings. Thats not much higher than the market multiple. I think you can do a whole lot worse than buying $BRO on current weakness. The deal looks expensive on the surface , but if they can pull of the synergies that management think they can do, then this deal creates quite a bit of value.
dealraker Posted July 22, 2025 Posted July 22, 2025 2 hours ago, Spekulatius said: Added to $BRO. As is often the case, the secondary offering price ($102 ) acts as a magnet to the share price, so I added some around $103. $BRO is actually fairly reasonable valued around 21x 2026 cash earnings. Thats not much higher than the market multiple. I think you can do a whole lot worse than buying $BRO on current weakness. The deal looks expensive on the surface , but if they can pull of the synergies that management think they can do, then this deal creates quite a bit of value. It always looks expensive, my 1994 original shares cost basis is 72 cents or so and I added when you did in the 60's - a couple years ago - and again today.
Malmqky Posted July 22, 2025 Posted July 22, 2025 16 hours ago, Spekulatius said: Added to $BRO. As is often the case, the secondary offering price ($102 ) acts as a magnet to the share price, so I added some around $103. $BRO is actually fairly reasonable valued around 21x 2026 cash earnings. Thats not much higher than the market multiple. I think you can do a whole lot worse than buying $BRO on current weakness. The deal looks expensive on the surface , but if they can pull of the synergies that management think they can do, then this deal creates quite a bit of value. I started a position in $BRO today as well. I think I finally understand things well enough to dip my toes in. Took a while. Might add AJG in the future...
Spekulatius Posted July 29, 2025 Posted July 29, 2025 (edited) $BRO results are out. I noticed that organic growth has slowed to 3.6% YoY? It was high single digits 8n the forts quarter and double digits last year, I think the hard market in insurance is coming to a conclusion. Picked up a few more shares AH below $100 and I expect some weakness tomorrow. Edited July 29, 2025 by Spekulatius
dealraker Posted July 29, 2025 Posted July 29, 2025 9 hours ago, Spekulatius said: $BRO results are out. I noticed that organic growth has slowed to 3.6% YoY? It was high single digits 8n the forts quarter and double digits last year, I think the hard market in insurance is coming to a conclusion. Picked up a few more shares AH below $100 and I expect some weakness tomorrow. Below is comments from Wells Fargo on BRO quarter. From my many years of owning the brokers I would say Spek is correct but that this is the repeated cycle of insurance pricing. We had quite the hard market for some time. I look for the brokers to continue to grow, a toll booth on the economy. Choose your starting point. The good: The EBITDA margin of 36.7% beat our 34.9% and improved 100bps from last year. The margin benefited from: (1) investment income of $36m, above our $19.4m (with $13m from the Accession capital, which equated to a 70bps benefit to the margin), and (2) higher contingent commissions of $45m (higher than our $33m). FCF was $310m (higher than our $221m) with CFO at 25.3% of revenue (favorable to 24-26% target, although co said would be lower due to tax payments that were pushed to Q2). The bad: While margin beat, it was mostly from Corporate (on higher investment income from $13m of capital raised for Accession deal) and Programs (52.8% vs our 49.5%) which benefited from higher contingents. If we back out 70bps from the $13m of extra NII and then assume extra contingents came on at 90% margin, margins would have beat by less (35.5% vs our 34.9%). Wholesale margin was in-line (at 34.1%) and Retail margin missed (at 27.5% vs our 27.8% and deteriorated by 50bps from last Q2). The ugly: Organic slowed and missed in all businesses and is shaping up to be the worst of the brokers for the quarter (MMC at 4%, AON at 6%, AJG guided Brokerage to 5.5%). Retail organic was only 3% (slowing from 4.1% and missing our 5.4%) and the company had guided to growth improving from the Q1 level with FY expected to be 1% greater than Q1. Wholesale organic of 3.9% also slowed from 6.7% and missed our 6.0%. Programs organic was 4.6%, also slowing from 13.6% in Q1 and missing our 7.9%. Ticker BRO Upside/(Downside) to Target 23.8% Price (07/28/2025) $102.58 52 Week Range $97.85 - 125.68 Market Cap (MM) $29,235 Source: Company Data, Wells Fargo Securities estimates, and Factset. NA = Not Available, NC = No Change, NE = No Estimate Elyse Greenspan, CFA Equity Analyst | Wells Fargo Securities, LLC Nicholas Annitto Associate Equity Analyst | Wells Fargo Securities, LLC Hristian Getsov Associate Equity Analyst | Wells Fargo Securities, LLC Westar Zong Associate Equity Analyst | Wells Fargo Securities, LLC
dealraker Posted July 29, 2025 Posted July 29, 2025 Bought 370 shares at just below $92. Will buy more in similar amounts if the price falls further. Not sure there's a quick rebound coming for a while.
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