dwy000 Posted January 19 Posted January 19 (edited) 4 hours ago, longterminvestor said: Here is J. Powell Brown in the flesh.... Good discussion. I just wish the Fletcher guy would actually let Brown talk. He wants to talk more about himself and advertise his firm than let Brown discuss his. Edited January 19 by dwy000
Hektor Posted January 19 Posted January 19 5 hours ago, dwy000 said: I just wish the Fletcher guy would actually let Brown talk +1
buylowersellhigh Posted January 21 Posted January 21 Any news on the brokers? Noticed they were all down (AJG, BRO, RYAN). Also the insurance companies.
rogermunibond Posted January 21 Posted January 21 I think with derisking the US 10 year and JGB 10 year yields are both falling. Maybe that's moving the insurance industry writ large.
gfp Posted January 21 Posted January 21 Traveller's is up! They said the magic word "AI" on their conference call so all good
WayWardCloud Posted January 22 Posted January 22 (edited) The Constellation Software debacle is making me rethink my position in brokers. I think both they and CSU will be fine investments long term but right now it seems like only the "an insurance soft market in coming" bear thesis is baked into the price. When a startup like the one Benchmark mentioned above starts making headlines and their CEO makes huge claims on Twitter, we could see a similar carnage in brokers stock prices, whether warranted or not. I'm basically looking at my whole portfolio thinking "could this be the next AI disruption fear"? I'm thinking of playing it safe and lowering my allocation from 10% to 7% (half AJG half BRO). Both are about at cost so I wouldn't pay much taxes at all. Am I making a mistake? Edited January 23 by WayWardCloud
dwy000 Posted January 26 Posted January 26 BRO earnings out. Market not too happy with them. I was a bit surprised to see negative organic revenue growth. Hope this acquisition hasn't bitten off more than they can chew for a while.
Spekulatius Posted January 27 Posted January 27 3 hours ago, dwy000 said: BRO earnings out. Market not too happy with them. I was a bit surprised to see negative organic revenue growth. Hope this acquisition hasn't bitten off more than they can chew for a while. - 2.8% organic growth and of course this leads to a revenue miss. They have some explaining to do tomorrow in their CC. Earnings itself were actually OK. I think the stock will remain in the doghouse for a while. I wonder what competitors (AJG) report. They also made a large acquisition.
dealraker Posted January 27 Posted January 27 10 hours ago, Spekulatius said: - 2.8% organic growth and of course this leads to a revenue miss. They have some explaining to do tomorrow in their CC. Earnings itself were actually OK. I think the stock will remain in the doghouse for a while. I wonder what competitors (AJG) report. They also made a large acquisition. Wells had turned what seemed excessively negative on BRO which turns out looking somewhat correct. Now for the rest of them, the organic story is in control. Only seemingly good thing is the free cash flow, annualized with 6% drop stock is about 14x.
Spekulatius Posted January 27 Posted January 27 36 minutes ago, dealraker said: Wells had turned what seemed excessively negative on BRO which turns out looking somewhat correct. Now for the rest of them, the organic story is in control. Only seemingly good thing is the free cash flow, annualized with 6% drop stock is about 14x. Yes, the BRO valuation is undemanding. As far as organic growth is concerned, it would not surprise me if AJG sees a deceleration as well. BRO went from +3% last quarter to ~-3%. AJG looked more solid this quarter but it would not surprise me if they are seeing the same trend. They will be reporting later this week.
dealraker Posted January 27 Posted January 27 (edited) 1 hour ago, Spekulatius said: Yes, the BRO valuation is undemanding. As far as organic growth is concerned, it would not surprise me if AJG sees a deceleration as well. BRO went from +3% last quarter to ~-3%. AJG looked more solid this quarter but it would not surprise me if they are seeing the same trend. They will be reporting later this week. Yea I think the organic issue is throughout all. Edited January 27 by dealraker
dwy000 Posted January 27 Posted January 27 1 hour ago, dealraker said: Yea I think the organic issue is throughout all. Have to listen to the call later. Im wondering how much is price vs volume. Are they losing share (ex-acquisitions) or is this the softening of the market that has been forecast for the last 5 years.
tnathan Posted January 27 Author Posted January 27 Definitely softening of the market which we've seen from the carriers, but with the inorganic growth lever im just not worried if you have to own these things for 3-5+ years
pricingpower Posted January 27 Posted January 27 AI is getting startlingly better quickly (gemini-cli is a neat free tool if you haven't played with it), any view which broker gets the least impacted over next 10y? I think consensus is personal lines most disrupted, mid-market next (broker is mostly a shopping around service?) but the highest complexity cross border stuff is where human activity in the loop remains stickiest? So BRO/AJG are most exposed to change while MMC/AON/WTW least? They all seems to have enough scale to spend as needed so is there much to think about beyond flavor of insurance they focus on and how aggressive the insurance co's can be to displace their intermediation economics?
dwy000 Posted January 27 Posted January 27 59 minutes ago, pricingpower said: AI is getting startlingly better quickly (gemini-cli is a neat free tool if you haven't played with it), any view which broker gets the least impacted over next 10y? I think consensus is personal lines most disrupted, mid-market next (broker is mostly a shopping around service?) but the highest complexity cross border stuff is where human activity in the loop remains stickiest? So BRO/AJG are most exposed to change while MMC/AON/WTW least? They all seems to have enough scale to spend as needed so is there much to think about beyond flavor of insurance they focus on and how aggressive the insurance co's can be to displace their intermediation economics? Im really not sure AI is a disrupter here that hurts vs a cost management tool that helps. The most susceptible lines are the highly generic direct ones that are already broker disrupted at the lowest end (like auto and home). This is also a product where the fine print really, really matters. Having someone who understands and can customize - and is being paid by the insurer - is a value add. Maybe way down the road it moves up the value chain but for the near future I'm looking for AI to take costs out and improve efficiency more than disrupting the business model.
tnathan Posted January 27 Author Posted January 27 34 minutes ago, dwy000 said: Im really not sure AI is a disrupter here that hurts vs a cost management tool that helps. The most susceptible lines are the highly generic direct ones that are already broker disrupted at the lowest end (like auto and home). This is also a product where the fine print really, really matters. Having someone who understands and can customize - and is being paid by the insurer - is a value add. Maybe way down the road it moves up the value chain but for the near future I'm looking for AI to take costs out and improve efficiency more than disrupting the business model. Agree. AI can likely speed up the process of finding policies for customers (which is a good thing) but for complex policies there is a lot of needed human interaction, going and inspecting facilities, plants, etc. Unless the carriers see a huge reason to change their own process, I don't see it leading to major disruption
Castanza Posted January 27 Posted January 27 3 hours ago, dwy000 said: Are they losing share (ex-acquisitions) Ex-poaching. They pretty much just had an entire acquisition from 2018 clawed back through employee walkout and poaching. Not sure how much that factors into this but I'm sure it plays a role. Either way, pretty amazing how fast the opinions of markets can change. I have a relatively sizeable position in BRO and will wait further to add. The stars are aligning for full market panic when it comes to the brokers. Likewise for AJG
dwy000 Posted January 27 Posted January 27 I had a chance to listen to the call. Somewhat comforting that they are still planning for organic growth in 2026 to exceed the 2.8% annual number for 2025 even after the poaching and soft pricing in segments. The cash continues to flow. Im slightly higher than @Dealraker on the cash flow multiple because I always subtract out the earn out payments, but even excluding those its a pretty tempting long term valuation.
dealraker Posted January 28 Posted January 28 (edited) 16 hours ago, dwy000 said: I had a chance to listen to the call. Somewhat comforting that they are still planning for organic growth in 2026 to exceed the 2.8% annual number for 2025 even after the poaching and soft pricing in segments. The cash continues to flow. Im slightly higher than @Dealraker on the cash flow multiple because I always subtract out the earn out payments, but even excluding those its a pretty tempting long term valuation. So Wells has free cash flow in the over $1.5 bil range for this year and over $1.8 bil f or 2028. Market cap $24 bil. So basically while we have obviously/clearly/of-course less potential growth as compared to the mid 1990's we are almost back to the valuations of when I bought the stock initially (1994). When Eliott Spitzer, attorney general of NY, was doing his contingency dance the valuations and prices of the brokers stalled for years. It can happen, it is almost certain to happen. Business and stock prices correlate over time, the value of the brokers during the Spitzer years was steadily going up while the stock prices were not. Compared to Mr. Market I think the probability to enter the broker business at the valuations of today has a very high probability of being a good idea. There's no hurry though, any catalyst for valuation up's may be some time out. Will be interesting to see the organic fallout with the other brokers in the next few days. Edited January 28 by dealraker
dwy000 Posted January 28 Posted January 28 3 hours ago, dealraker said: So Wells has free cash flow in the over $1.5 bil range for this year and over $1.8 bil f or 2028. Market cap $24 bil. So basically while we have obviously/clearly/of-course less potential growth as compared to the mid 1990's we are almost back to the valuations of when I bought the stock initially (1994). When Eliott Spitzer, attorney general of NY, was doing his contingency dance the valuations and prices of the brokers stalled for years. It can happen, it is almost certain to happen. Business and stock prices correlate over time, the value of the brokers during the Spitzer years was steadily going up while the stock prices were not. Compared to Mr. Market I think the probability to enter the broker business at the valuations of today has a very high probability of being a good idea. There's no hurry though, any catalyst for valuation up's may be some time out. Will be interesting to see the organic fallout with the other brokers in the next few days. The other thing I worry a bit about is the contingent commissions. Its unlikely we will get a year like 2025 again with almost zero major storms/catastrophes and those contingents helped give a tailwind to revenues and margins - while organic growth still declined. Suspect growth will be much slower and they'll go back to smaller acquisitions.
Eldad Posted January 28 Posted January 28 On 1/27/2026 at 12:52 PM, Castanza said: Ex-poaching. They pretty much just had an entire acquisition from 2018 clawed back through employee walkout and poaching. Not sure how much that factors into this but I'm sure it plays a role. Either way, pretty amazing how fast the opinions of markets can change. I have a relatively sizeable position in BRO and will wait further to add. The stars are aligning for full market panic when it comes to the brokers. Likewise for AJG I’m new to the space but they sure did spend a ton of time on the call talking about this poaching. It’s 23 million in annual revenue! Seems like 10ths of 1% of revenue is not worth talking about. I guess in a business that’s all based on the salesman’s relationships this is a major source of paranoia. 6 hours ago, dwy000 said: The other thing I worry a bit about is the contingent commissions. Its unlikely we will get a year like 2025 again with almost zero major storms/catastrophes and those contingents helped give a tailwind to revenues and margins - while organic growth still declined. Suspect growth will be much slower and they'll go back to smaller acquisitions. It seemed like they were saying in a big Cat year you would get a lot of Cat policy inflation that would overcome this. Like you either get the contingent commissions or higher cat prices. I’m guessing higher Cat prices would be better overall.
Eldad Posted January 28 Posted January 28 7 hours ago, dwy000 said: The other thing I worry a bit about is the contingent commissions. Its unlikely we will get a year like 2025 again with almost zero major storms/catastrophes and those contingents helped give a tailwind to revenues and margins - while organic growth still declined. Suspect growth will be much slower and they'll go back to smaller acquisitions. They had that big argument on the call about how the analysts don’t really understand the business if they don’t add the contingent commissions back to the organic revenue. Made me curious. Reported Organic for the quarter was 1.079 Billion vs 1.110 Billion. Contingents are subtracted for that number. If you add them back it’s 1.173 vs 1.167. Really liked listening to the CFO. Powell has an annoying voice that sounds like a pompous rich guy, but I will try to get over it.
dwy000 Posted January 28 Posted January 28 34 minutes ago, Eldad said: They had that big argument on the call about how the analysts don’t really understand the business if they don’t add the contingent commissions back to the organic revenue. Made me curious. Reported Organic for the quarter was 1.079 Billion vs 1.110 Billion. Contingents are subtracted for that number. If you add them back it’s 1.173 vs 1.167. Really liked listening to the CFO. Powell has an annoying voice that sounds like a pompous rich guy, but I will try to get over it. Great point on adding back contingents for organic vs total.
tnathan Posted January 29 Author Posted January 29 3 hours ago, Eldad said: They had that big argument on the call about how the analysts don’t really understand the business if they don’t add the contingent commissions back to the organic revenue. Made me curious. Reported Organic for the quarter was 1.079 Billion vs 1.110 Billion. Contingents are subtracted for that number. If you add them back it’s 1.173 vs 1.167. Really liked listening to the CFO. Powell has an annoying voice that sounds like a pompous rich guy, but I will try to get over it. Lol totally agree on Powell and his voice.
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