longterminvestor Posted January 29 Posted January 29 WR Berkley Q4 Call.pdf Take a look at excerpt from WR Berkely's Q4 transcript. Company President Mr. Berkley's comments regarding the relationship between the "manufacturer" (insurance companies) and the "distributor" (brokers) are a shot across the bow of broker community when taken word for word. Mr. Berkley rolls his alarming comments back slightly with "we are very committed to our partners". Also later during Q&A in call, Mr. Berkley talks about a specific product (Berkley Embedded) where customer will have a point of sale product. WR Berkley is not a little pup insurance company. I am going to take some time to digest these comments. Not going to speculate what spooked markets for brokers, but Mr. Berkley's comments are definitely "fightin' words". 1
UK Posted January 29 Posted January 29 (edited) 2 hours ago, longterminvestor said: WR Berkley Q4 Call.pdf 5.76 MB · 8 downloads Take a look at excerpt from WR Berkely's Q4 transcript. Company President Mr. Berkley's comments regarding the relationship between the "manufacturer" (insurance companies) and the "distributor" (brokers) are a shot across the bow of broker community when taken word for word. Mr. Berkley rolls his alarming comments back slightly with "we are very committed to our partners". Also later during Q&A in call, Mr. Berkley talks about a specific product (Berkley Embedded) where customer will have a point of sale product. WR Berkley is not a little pup insurance company. I am going to take some time to digest these comments. Not going to speculate what spooked markets for brokers, but Mr. Berkley's comments are definitely "fightin' words". This is interesting. Also the distribution in this sector is quite plentiful/non consolidated, as the manufacturing itself. Hard to understand who would have the upper hand. What are the reasons for historically insurers not going after brokerage business themselves? Edited January 29 by UK
dwy000 Posted January 29 Posted January 29 (edited) 12 hours ago, longterminvestor said: WR Berkley Q4 Call.pdf 5.76 MB · 15 downloads Take a look at excerpt from WR Berkely's Q4 transcript. Company President Mr. Berkley's comments regarding the relationship between the "manufacturer" (insurance companies) and the "distributor" (brokers) are a shot across the bow of broker community when taken word for word. Mr. Berkley rolls his alarming comments back slightly with "we are very committed to our partners". Also later during Q&A in call, Mr. Berkley talks about a specific product (Berkley Embedded) where customer will have a point of sale product. WR Berkley is not a little pup insurance company. I am going to take some time to digest these comments. Not going to speculate what spooked markets for brokers, but Mr. Berkley's comments are definitely "fightin' words". What do you think he's referring to by the brokers being competitors instead of distributors? Is this the MGA business? Are any large brokers actually holding risk themselves? How much of this is grumbling because the market is softening and theyre looking to keep revenue dollars wherever possible vs a long term change in the business? Edited January 29 by dwy000
Eldad Posted January 29 Posted January 29 (edited) I really want to invest here but I just have small problems with each one. BRO - seems like the obvious choice. Pros: Giant family ownership. Still relatively small. Great growth and currently very cheap. Cons: It looks like they pay too much. ROE sucks as a result. Even FCF ROE sucks. Then the fact that they maybe overpaid with a ton of stock. It just bothers me. AJG: have not looked into much but seems to be the same as BRO on paying too much and not as cheap. MRSH: It looks like they have had to deploy 3/4 of their cash to keep the 10% growth going. Better on ROE front but seems like a 10% return kind of stock (I would rather get more BRK in that case) RYAN: weird structure probably a no go. AON: Same as Marsh not really even cheap. Anyone have any advice or thoughts? Edited January 29 by Eldad
Cod Liver Oil Posted January 29 Posted January 29 (edited) Anecdotal evidence and sample size of one but I just repriced homeowners on 3 properties and the premiums are now at least 25% lower than 5 years ago. All east coast properties btw. Edited January 29 by Cod Liver Oil
Red Lion Posted January 29 Posted January 29 57 minutes ago, Cod Liver Oil said: Anecdotal evidence and sample size of one but I just repriced homeowners on 3 properties and the premiums are now at least 25% lower than 5 years ago. Wow. They're at least 2-3X in California.
dwy000 Posted January 29 Posted January 29 12 minutes ago, Red Lion said: Wow. They're at least 2-3X in California. It seems to be all over the place. My insurer sent me a renewal notice at like 30% price increases. So I called my broker and asked what was going on. She shopped it a bit and my new insurance is 20% less than I paid last year! I dont know if its companies looking to manage regional exposures or what but prices should not be that far apart.
gfp Posted January 29 Posted January 29 (edited) https://s28.q4cdn.com/872121257/files/doc_financials/2025/q4/4Q-2025_Earnings-Release-FINAL.pdf (AJG press release Q4) Edited January 29 by gfp
tnathan Posted January 29 Author Posted January 29 What a nice surprise from AJG. Worried after the BRO report but kind of seems like BRO's issues are a bit of its own.
longterminvestor Posted January 30 Posted January 30 11 hours ago, dwy000 said: What do you think he's referring to by the brokers being competitors instead of distributors? Is this the MGA business? Are any large brokers actually holding risk themselves? How much of this is grumbling because the market is softening and theyre looking to keep revenue dollars wherever possible vs a long term change in the business? There are many arrangements where brokers can go to Wall Street or PE and get a pile of capital. That is "fast money" and know nothing of insurance. Broker can get ready A rated paper front for a fee using the pile of capital as a "collateral" and boom you have a little insurance company to compete against the big boys and girls. The customer just wants "A Rated Paper". Fronting carrier could be Trisura or State National (Markel) - there are others. Ultimately if the pile of money runs out, Trisura or State National will have to pay claims because according to language of policy, Trisura/State National are on hook. Broker has a new product to sell and Wall Street/PE are in the "risk bearing business". Pretty slick but Berkley is correct, that arrangement is in direct competition to the insurance carriers. Well run, it can print money, poorly run and it is a quagmire - theres a few that pop up and then lose their fronts, then come back with a new front - looks different because the paper is new but its the same shit box with a new name. I guess its kinda like Walmart getting bigger than Proctor & Gamble. For many years, P&G had the edge but then at some point, Walmart started telling P&G what they were and were not willing to pay. I guess that's the fear from carriers because, as we have discussed, the brokers wield a lot of power.
dealraker Posted January 30 Posted January 30 12 hours ago, tnathan said: What a nice surprise from AJG. Worried after the BRO report but kind of seems like BRO's issues are a bit of its own. A lot of things begin festering in the mind when stock prices fall. Given my association with Gallagher I've learned to trust management's view, it hasn't mislead me since 1994. It hasn't always been happy talk, but today as of yet they are quite ok with the way things are going both within the company and in the broker business overall.
dealraker Posted January 30 Posted January 30 15 hours ago, dwy000 said: It seems to be all over the place. My insurer sent me a renewal notice at like 30% price increases. So I called my broker and asked what was going on. She shopped it a bit and my new insurance is 20% less than I paid last year! I dont know if its companies looking to manage regional exposures or what but prices should not be that far apart. The loyalty penalty. Shop your insurance every couple of years at minimum and every year there's a big increase.
dealraker Posted January 30 Posted January 30 Some Wells Fargo commentary on the 4th quarter: The good: Brokerage underlying organic was 5%, in-line with December guide and 2026 underlying outlook of 5.5% is also unchanged. Brokerage EBITDAC margin beat us by 40bps and was favorable by ~50bps to guide. Risk Management organic was in-line (at 7%) and margin was better (21.6% vs our 20.8%). Further, Risk Management margin guide for 2026 of 21-22% was favorable to our prior 21%. AP EBITDAC of $215m beat guided $200m on lower expenses, which is good because they missed on AP last quarter. The bad: AJG restated Brokerage organic to remove the large life deals plus the deferred revenue assumption changes as they believe this more accurately reflects the underlying growth of its business. Both were immaterial for the FY but were a combined -3% to Q4 organic (-1% for life and -2% for accounting) which would have put organic under the old definition at 2%, missing our 3.3% and the low-end of the guided 2-4%. The ugly: Gallagher provided a lot of moving pieces around Brokerage margin for 2026 with the range equating to deterioration of 20-140bps (80bps at midpoint), unfavorable to our prior 20 bps of deterioration. Main headwinds are around FII (lack of income on AP cash and lower rates). AP synergies are expected to contribute 70bps for FY and 140bps in Q4, showing they will be at run-rate $160m at end of year ($48m in Q4) but below it during year.
dealraker Posted January 30 Posted January 30 A bit more Wells, won't post well be you guys if interested can figure it out: Wells Fargo Express Takeaways Arthur J. Gallagher & Co. (AJG) | Rating: Overweight | Price Target: $298.00 Analyst: Elyse Greenspan Financials FY (Dec) 2026E 2027E 2028E $ ESTIMATES EPS Q1 4.42 E 4.95 E 5.53 E Q2 2.88 E 3.30 E 3.76 E Q3 3.09 E 3.53 E 3.97 E Q4 2.86 E 3.28 E 3.70 E AN 13.25 E 15.05 E 16.95 E Rev. (MM) 16.93B E 18.62B E 20.41B E FCF (MM) 3,542.5 E 4,045.0 E 4,579.8 E EBIT (MM) 4,642.4 E 5,322.9 E 6,035.1 E EBITDA (MM) 5.73B E 6.45B E 7.20B E Organic Growth (%) 5.6% E 5.1% E 5.1% E WELLS FARGO vs. CONSENSUS Consensus Estimate 13.30 E 14.93 E 17.47 E Difference from Consensus 0.9% (2.9)% VALUATION P/E 18.6x 16.3x 14.5x EV/Revenue 4.5x 4.1x 3.8x EV/FCF 21.7x 19.0x 16.8x FCF Yield 5.5% 6.3% 7.2% EV/EBIT 16.5x 14.4x 12.7x EV/EBITDA 13.4x 11.9x 10.7x EPS: Represents adjusted EPS EBIT (MM): Excludes corporate EBITDA (MM): Excludes corporate Organic Growth (%): Organic growth reflects the brokerage segment only Consensus Estimate: EPS; Source: FactSet Source: Company Data, Wells Fargo Securities estimates, and Factset. NA = Not Available, NE = No Estimate Investment Thesis AJG is positioned to show strong organic revenue growth, continues to add bolt-on acquisitions, and is growing its EBITDA. Further, the company is benefiting from increased scale following acquiring Willis Re's treaty reinsurance business and more recently, the AP acquisition. Typically, brokers generating the strongest margins have tended to have the highest valuations. As a result, we would expect AJG's valuation to expand to reflect its stronger margin profile. We rate the shares Overweight. Risk vs. Reward – Upside/Downside Price Target Scenarios $0 $131 $262 $393 $526
dwy000 Posted January 30 Posted January 30 9 hours ago, longterminvestor said: There are many arrangements where brokers can go to Wall Street or PE and get a pile of capital. That is "fast money" and know nothing of insurance. Broker can get ready A rated paper front for a fee using the pile of capital as a "collateral" and boom you have a little insurance company to compete against the big boys and girls. The customer just wants "A Rated Paper". Fronting carrier could be Trisura or State National (Markel) - there are others. Ultimately if the pile of money runs out, Trisura or State National will have to pay claims because according to language of policy, Trisura/State National are on hook. Broker has a new product to sell and Wall Street/PE are in the "risk bearing business". Pretty slick but Berkley is correct, that arrangement is in direct competition to the insurance carriers. Well run, it can print money, poorly run and it is a quagmire - theres a few that pop up and then lose their fronts, then come back with a new front - looks different because the paper is new but its the same shit box with a new name. I guess its kinda like Walmart getting bigger than Proctor & Gamble. For many years, P&G had the edge but then at some point, Walmart started telling P&G what they were and were not willing to pay. I guess that's the fear from carriers because, as we have discussed, the brokers wield a lot of power. Thanks for the color. It sounds like their frustration is with the excess capital looking to get placed as opposed to the brokers who are just looking for well priced coverage for their clients (granted the brokers seem to be driving a lot of the coming together of the excess capital into fronting and other vehicles).
Junior R Posted February 2 Posted February 2 Quote Arthur J. Gallagher & Co. (AJG) on Monday said it has acquired Hunt Benefits & Associates and Tenaglia & Associates, together operating as Hunt Financial Group.
dealraker Posted February 2 Posted February 2 (edited) Was cheaper by a bit in 2015 but the story seems familiar, AJG earned $2.06 in for the year 2015. Actually the stock fell into the $37 range. Hopefully history repeats: Arthur J. Gallagher & Co. (AJG) saw its stock price decline by approximately 12.8% during 2015, starting the year at $46.98 and ending at $40.94. The primary reasons for the stock's underperformance in 2015 were: Integration Challenges: The company faced significant integration efforts following several of the largest acquisitions in its history. While these acquisitions grew adjusted revenues by 17%, the operational complexity of merging these large entities weighed on near-term stock performance. Margin Pressures: Integration and acquisition-related costs impacted margins, creating investor concern regarding the near-term delivery of expected synergies from its rapid inorganic growth strategy. Market Sentiment: Investors were cautious about the "medium to high bar" for growth given the decelerating pricing in property and casualty insurance and relatively constant nominal GDP during that period. Edited February 2 by dealraker
dwy000 Posted February 9 Posted February 9 Almost every broker down 5% today. Did I miss some analyst downgrade on the sector?
treasurehunt Posted February 9 Posted February 9 1 hour ago, dwy000 said: Almost every broker down 5% today. Did I miss some analyst downgrade on the sector? Did Anthropic release a Claude insurance broker plugin?
MungerWunger Posted February 9 Posted February 9 2 minutes ago, treasurehunt said: Did Anthropic release a Claude insurance broker plugin? at this point, probably
thowed Posted February 9 Posted February 9 Forgive me, I just lifted this from someone on Twitter, no idea if legit or not... "Insurance brokers are getting crushed today after OpenAI approved the first insurer-built AI app on ChatGPT. From GS – “The immediate feedback still is a degree on confusion & the top question is 'Why would this primarily impact the brokers (who primarily do commercial .. think there's only home insurance at the majors for high net worth)' .. with a few arguing it's 1) more negative for personal insurance carriers given greater price transparency/shopping/competition, and 2) Insurance brokers dealing in more specialty products should be better insulated given complexity. All that said, there's certainly a degree of 'don't fight the narrative' .. and this is all very fresh/fluid at the moment”"
dwy000 Posted February 9 Posted February 9 17 minutes ago, thowed said: Forgive me, I just lifted this from someone on Twitter, no idea if legit or not... "Insurance brokers are getting crushed today after OpenAI approved the first insurer-built AI app on ChatGPT. From GS – “The immediate feedback still is a degree on confusion & the top question is 'Why would this primarily impact the brokers (who primarily do commercial .. think there's only home insurance at the majors for high net worth)' .. with a few arguing it's 1) more negative for personal insurance carriers given greater price transparency/shopping/competition, and 2) Insurance brokers dealing in more specialty products should be better insulated given complexity. All that said, there's certainly a degree of 'don't fight the narrative' .. and this is all very fresh/fluid at the moment”" Sounds like Kayak but for home and car insurance.
Junior R Posted February 9 Posted February 9 Insurance broker stocks tumble as OpenAI approves first AI insurance app
MungerWunger Posted February 9 Posted February 9 asset light businesses are no longer sexy in the world of AI
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