Insurance Brokers (MMC, AON, AJG, WTW, BRO)

[Eldad]

14 minutes ago, Sweet said:

Has the purchase of Accession impaired their ability to make future acquisitions?  Balance sheets looks an uglier, even if revenue looks better.  

It looked to me like they spent every dime of cashflow on buybacks. They usually buy in the 13-16x ebitda range right? Their stock is currently below that so I’m happy they are slowing the M&A. 

[Eldad]

14 minutes ago, Sweet said:

Has the purchase of Accession impaired their ability to make future acquisitions?  Balance sheets looks an uglier, even if revenue looks better.  

It looked to me like they spent every dime of cashflow on buybacks. They usually buy in the 13-16x ebitda range right? Their stock is currently below that so I’m happy they are slowing the M&A. 

[Spekulatius]

1 hour ago, Eldad said:

It looked to me like they spent every dime of cashflow on buybacks. They usually buy in the 13-16x ebitda range right? Their stock is currently below that so I’m happy they are slowing the M&A. 

There were also some cash outflows due to earnings outs.

 

I don’t think the Accession acquisition was a mistake . It seemed to have increased per share metrics  but they now need to take some time off from larger deals to digest the meal.

 

I did add some shares today.

[Eldad]

I read the transcript of the BRO call. CAT business was slammed. Down 15-35%. 16% of their business is FL so if you are looking for a reason they are underperforming peers, that is likely it. Powell said coastal property pricing is back to 2016 - 2017 levels. 

[Spekulatius]

5 minutes ago, Eldad said:

I read the transcript of the BRO call. CAT business was slammed. Down 15-35%. 16% of their business is FL so if you are looking for a reason they are underperforming peers, that is likely it. Powell said coastal property pricing is back to 2016 - 2017 levels. 

Yes, that’s the reason or the lack of organic growth. I don’t think the number were a disaster and added some shares.

[dealraker]

The insurance broker business is experiencing excitement all over the place these days.  Given all of Patrick Ryan's insider buys the RYAN results are quite surprising and Wells Fargo has literally cut their near term view 50%.  Gallagher keeps plugging along it seems for now.

 

About 20 years ago being long retired by then I began a two year jaunt into a counseling/psychology college program as while I knew much of it would be somewhat boringly basic - that there would be a bunch of the program that I would gain from and enjoy.  One of the things one professor discussed with me while I was producing taped sessions with clients - was when my client smiled and presented happy and whatnot discussing bad things - when it would have been much more real that there were tears.  My professor said basically, "Yes, at the party just remember the person most over-the-top smiling and chanting euphorically is likely to have equal other-side-of-the-mountain episodes, yes not happy times."

 

So it is with the brokers, the best of times is followed by the worst, smiles turn to tears.  But when is value built?  My view is always the same, that is if you are a long term investor, that what lies in the future is there and was there even when the good times are a-rolling.  So this era laid in front of the brokers last year when times were super-duper, when BRO had a $135 target at B of A Merrill and $120 or so at Wells.  This era should have been built into a rational person's view of intrinsic value.  In other words when this type environment arrives it should not be a surprise...maybe the AI severity is an exception.

 

But in any event this pricing cycle can last a while.  But my guess is that management skill is now on tap to gain even more than its normal importance.  That means for me that while personally I'll not be adding to my stocks (I have added to the two trusts I manage) I'll be watching brokers like BRO to see what they do and when.  The insider ownership is such that it is hard to fathom some type of poor outcome from here given the history and insight the Brown family and its chosen managers have.  Again, given this part of the insurance cycle was a certainty it is my guess BRO management is well-prepared to deal with it.

 

I've always been a bit both agitated/annoyed or whatever that Patrick Gallagher doesn't hold on to his AJG stock, he doesn't own much at all.  Yet he's obviously obsessed with running the place and seems to do an ideal job of it.

 

Rambling some this a.m. but to me, I'll state it again, people come to the insurance business investing place and do an intense dance trying to gain knowledge.  This is a real job because the insurance business as far as pricing/cycles/models/internal workings is just about impossible to grasp and it is ever-changing fast - what you think you've learned is based on something now changed.  My view is the best investors step back from the details and simply go with people they think are good at what they do, that a deep understanding of the business is a harmful as helpful if you try to use that as to when/what to buy.

 

I like the Brown and Gallagher bunch, I like them a lot.  Much like the Fairfax/Berkshire crowd as to underwriting, these guys have a history.  It may take some patience to get a feel for when this tough time begins to change, but value is being built by someone somewhere right now, it just isn't being revealed by earnings or stock prices yet- and not for a while.  

 

If you think this cycle is bad for the insurance business?  Just wait till the AI cycle changes.  That will be one for the record books!

 

 

Edited May 1 by dealraker

[pricingpower]

Seemed cheeky that when BRO presents their organic revenues they excluded from the calculation the 31mm of revenue lost from the 275 employees group that quit to form a competitor across the street.  keeping that in the calculation shifts them from flat organic to shrinking a touch?  Did like how they called out the opex savings of no longer paying those folks but expectation compensation costs will come back as they replace.  Do wonder how much stock can drop before some goodwill impairments can start kicking in across the sector, they are currently showing non-cash GAAP gains on the stock dropping because of the escrow shares (think it was 64mm this quarter).

[Sweet]

2 hours ago, dealraker said:

The insurance broker business is experiencing excitement all over the place these days.  Given all of Patrick Ryan's insider buys the RYAN results are quite surprising and Wells Fargo has literally cut their near term view 50%.  Gallagher keeps plugging along it seems for now.

 

About 20 years ago being long retired by then I began a two year jaunt into a counseling/psychology college program as while I knew much of it would be somewhat boringly basic - that there would be a bunch of the program that I would gain from and enjoy.  One of the things one professor discussed with me while I was producing taped sessions with clients - was when my client smiled and presented happy and whatnot discussing bad things - when it would have been much more real that there were tears.  My professor said basically, "Yes, at the party just remember the person most over-the-top smiling and chanting euphorically is likely to have equal other-side-of-the-mountain episodes, yes not happy times."

 

So it is with the brokers, the best of times is followed by the worst, smiles turn to tears.  But when is value built?  My view is always the same, that is if you are a long term investor, that what lies in the future is there and was there even when the good times are a-rolling.  So this era laid in front of the brokers last year when times were super-duper, when BRO had a $135 target at B of A Merrill and $120 or so at Wells.  This era should have been built into a rational person's view of intrinsic value.  In other words when this type environment arrives it should not be a surprise...maybe the AI severity is an exception.

 

But in any event this pricing cycle can last a while.  But my guess is that management skill is now on tap to gain even more than its normal importance.  That means for me that while personally I'll not be adding to my stocks (I have added to the two trusts I manage) I'll be watching brokers like BRO to see what they do and when.  The insider ownership is such that it is hard to fathom some type of poor outcome from here given the history and insight the Brown family and its chosen managers have.  Again, given this part of the insurance cycle was a certainty it is my guess BRO management is well-prepared to deal with it.

 

I've always been a bit both agitated/annoyed or whatever that Patrick Gallagher doesn't hold on to his AJG stock, he doesn't own much at all.  Yet he's obviously obsessed with running the place and seems to do an ideal job of it.

 

Rambling some this a.m. but to me, I'll state it again, people come to the insurance business investing place and do an intense dance trying to gain knowledge.  This is a real job because the insurance business as far as pricing/cycles/models/internal workings is just about impossible to grasp and it is ever-changing fast - what you think you've learned is based on something now changed.  My view is the best investors step back from the details and simply go with people they think are good at what they do, that a deep understanding of the business is a harmful as helpful if you try to use that as to when/what to buy.

 

I like the Brown and Gallagher bunch, I like them a lot.  Much like the Fairfax/Berkshire crowd as to underwriting, these guys have a history.  It may take some patience to get a feel for when this tough time begins to change, but value is being built by someone somewhere right now, it just isn't being revealed by earnings or stock prices yet- and not for a while.  

 

If you think this cycle is bad for the insurance business?  Just wait till the AI cycle changes.  That will be one for the record books!

 

 

I know you don’t think you are a good writer, but I’d disagree.  Always thoughtful.

 

51 minutes ago, pricingpower said:

Seemed cheeky that when BRO presents their organic revenues they excluded from the calculation the 31mm of revenue lost from the 275 employees group that quit to form a competitor across the street.  keeping that in the calculation shifts them from flat organic to shrinking a touch?  Did like how they called out the opex savings of no longer paying those folks but expectation compensation costs will come back as they replace.  Do wonder how much stock can drop before some goodwill impairments can start kicking in across the sector, they are currently showing non-cash GAAP gains on the stock dropping because of the escrow shares (think it was 64mm this quarter).

What’s the story behind this?  Do they just walk out the door with that revenue?  

[HJ]

At the time of Hays acquisition 8 years ago, the revenue run rate was ~$200MM, which presumably have grown.  If all said and done, $50MM annual revenue walk out the door, it's bad but arguably not impairment.  Accounting question aside, the business question is how successful will BRO be in rebuilding the MA and MN businesses where the departures were based.  They seem to have injected a lot of Accession people into leadership positions in the retail organization and Accession was based in Boston.  Would stand to reason the closing of the acquisition may well be the straw that led to the turmoil.  BRO is trading at multiple last seen in the 2000's.  The difference between now and then of course is that it's a much larger organization, presumably significantly harder to manage today.  But it's the case with Gallagher as well.

[Castanza]

14 minutes ago, Sweet said:

I know you don’t think you are a good writer, but I’d disagree.  Always thoughtful.

 

What’s the story behind this?  Do they just walk out the door with that revenue?  

 

longerminvestor posted this a few pages back. Good summary of what's going on. 

 

https://www.linkedin.com/pulse/naughty-very-nice-brandon-schuh-mjs1c/

[Sweet]

23 minutes ago, Castanza said:

 

longerminvestor posted this a few pages back. Good summary of what's going on. 

 

https://www.linkedin.com/pulse/naughty-very-nice-brandon-schuh-mjs1c/

Thanks.  Very interesting.  Has anyone posted any thoughts on how this might be resolved / settled?

[dealraker]

5 hours ago, Sweet said:

Thanks.  Very interesting.  Has anyone posted any thoughts on how this might be resolved / settled?

I sit in the automobile for hours each month listening to insurance broker owners and part owners discuss these exact issues.  These are my friends who are mountain bikers and when we aren't riding local trails we go to one of the many trails within a couple hours.  I think these issues are common, not at all new, but likely larger in scale.  Regardless of the legal outcomes I think this is the norm going forward.  

Edited May 1 by dealraker

[benchmark]

Interesting reaction to AJG earning report, which I think is a decent report, but different firms reacted differently

 

"Piper Sandler Adjusts Arthur J. Gallagher Price Target to $211 From $226"

"Keefe Bruyette & Woods Adjusts Arthur J. Gallagher Price Target to $235 From $246"

"Mizuho Securities Adjusts Arthur J. Gallagher Price Target to $261 From $259"

 

 

 

 

[HJ]

The insurance brokers have all been in a down trend for almost a year now.  The underlying commercial insurance market has been transitioning from an extended hard market to a soft one.  Even though the valuation metrics have come down to historically low levels, the question seem to be how long the soft market will persist.  Below is a chart in Chubb’s annual letter:

 

When interposed against the stock performance of the brokers, from 2002 to 2012 AJG essentially fluctuated from spit adjusted low 20’s to mid 30’s for a decade.  After a break into the low 40’s in 2013, it didn’t get above 50 until late 2016.  BRO’s stock performance is broadly similar.  We can also see that from 50k feet, it's broadly consistent with operating performance of a top tier insurer like Chubb.  In a sense it’s not surprising, as we shouldn’t expect distributors to dramatically outperform the broader insurance industry.  But are there changes in the insurance distributor / carrier dynamics that argues for the brokers permanently taking a bigger share of the industry’s profit pie today vs. 20 years ago?  Has distribution gotten more consolidated than the carriers?  One thing seems to be that PE’s have discovered this sector as producing very leverageable cash flows.  But what are the implications of that, other than maybe they forced both AJG and BRO to have made their biggest acquisitions at the top of the insurance cycle?  Not necessarily saying the acquisitions are wrong things to do either, just asking whether a case can be made that a replay of 2002-2016 isn't ahead of us.   

[dealraker]

8 hours ago, HJ said:

The insurance brokers have all been in a down trend for almost a year now.  The underlying commercial insurance market has been transitioning from an extended hard market to a soft one.  Even though the valuation metrics have come down to historically low levels, the question seem to be how long the soft market will persist.  Below is a chart in Chubb’s annual letter:

 

When interposed against the stock performance of the brokers, from 2002 to 2012 AJG essentially fluctuated from spit adjusted low 20’s to mid 30’s for a decade.  After a break into the low 40’s in 2013, it didn’t get above 50 until late 2016.  BRO’s stock performance is broadly similar.  We can also see that from 50k feet, it's broadly consistent with operating performance of a top tier insurer like Chubb.  In a sense it’s not surprising, as we shouldn’t expect distributors to dramatically outperform the broader insurance industry.  But are there changes in the insurance distributor / carrier dynamics that argues for the brokers permanently taking a bigger share of the industry’s profit pie today vs. 20 years ago?  Has distribution gotten more consolidated than the carriers?  One thing seems to be that PE’s have discovered this sector as producing very leverageable cash flows.  But what are the implications of that, other than maybe they forced both AJG and BRO to have made their biggest acquisitions at the top of the insurance cycle?  Not necessarily saying the acquisitions are wrong things to do either, just asking whether a case can be made that a replay of 2002-2016 isn't ahead of us.   

Good post HC.  Gallagher used cash so it was expensive to buy Associated when they did for what they paid.  Under the "ain't-it-awful" column when brokers stall out - and yes it can be for years - basically one like AJG at today's price is stacking 7% cash returns - and that % methodically grows - in the vault.  So it isn't a terrible thing.

 

There are a bunch of businesses that when their cycle turns it gets bad, more bad, and then so bad that the business is literally terrible for lengthy periods.  Unless AI rips the brokers to shreds this won't be the case for the insurance people.  One of the reasons I was lured into the business decades ago was because I got so tired of the boom and bust of construction while watching my insurance friends who seemingly never comprehended that there was a downturn in process.  Yea, they lived large when I was starving.

 

Down the road we go.

[dealraker]

1 minute ago, dealraker said:

Good post HC.  Gallagher used cash so it was expensive to buy Associated when they did for what they paid.  Under the "ain't-it-awful" column when brokers stall out - and yes it can be for years - basically one like AJG at today's price is stacking 7% cash returns - and that % methodically grows - in the vault.  So it isn't a terrible thing.

 

There are a bunch of businesses that when their cycle turns it gets bad, more bad, and then so bad that the business is literally terrible for lengthy periods.  Unless AI rips the brokers to shreds this won't be the case for the insurance people.  One of the reasons I was lured into the business decades ago was because I got so tired of the boom and bust of construction while watching my insurance friends who seemingly never comprehended that there was a downturn in process.  Yea, they lived large when I was starving.

 

Down the road we go.

Also...I think Chubb, which I bought last year (I think it was last year) in the $265 range, and I bought a lot of it, is a very much underappreciated business.  Endlessly considered fully priced or over-valued at 10-11 or 12 times earnings Chubb just grinds along.  I admire the management style.  I've grown up for 4 and 5 decades with the Berk, Markel, Fairfax, and Tokio Marine models...but the Chubb one works too.

[pine]

34 minutes ago, dealraker said:

Also...I think Chubb, which I bought last year (I think it was last year) in the $265 range, and I bought a lot of it, is a very much underappreciated business.  Endlessly considered fully priced or over-valued at 10-11 or 12 times earnings Chubb just grinds along.  I admire the management style.  I've grown up for 4 and 5 decades with the Berk, Markel, Fairfax, and Tokio Marine models...but the Chubb one works too.

Along the same lines as Chubb, what about Cincinnati Financial? They have done well over a long time and are a boring outfit that investors do not seem to talk about much. 

[Castanza]

On 5/1/2026 at 4:00 PM, dealraker said:

These are my friends who are mountain bikers and when we aren't riding local trails we go to one of the many trails within a couple hours.

What bike are you riding these days? 

[dealraker]

33 minutes ago, Castanza said:

What bike are you riding these days? 

I have two nearly identical Specialized Epic Evo bikes, one a 2022 and the other a 2023.  Of course I just ride cross country trails so light weight for me at my age is important.  Both bikes weigh in at slightly sub 22 lbs, both have 120mm suspension up front and 110 in the rear.   I'm very happy to do a 10 mile - about 1 hour - ride and go home these days LOL.  In the past that wouldn't have begun to keep me satisfied. 

 

https://www.specialized.com/us/en/epic-evo-pro/p/199657?color=319952-199657

Edited May 4 by dealraker

[dealraker]

On 5/3/2026 at 7:33 AM, pine said:

Along the same lines as Chubb, what about Cincinnati Financial? They have done well over a long time and are a boring outfit that investors do not seem to talk about much. 

I simply don't follow CINF.

[Castanza]

20 minutes ago, dealraker said:

I have two nearly identical Specialized Epic Evo bikes, one a 2022 and the other a 2023.  Of course I just ride cross country trails so light weight for me at my age is important.  Both bikes weigh in at slightly sub 22 lbs, both have 120mm suspension up front and 110 in the rear.   I'm very happy to do a 10 mile - about 1 hour - ride and go home these days LOL.  In the past that wouldn't have begun to keep me satisfied. 

 

https://www.specialized.com/us/en/epic-evo-pro/p/199657?color=319952-199657

 

Nice! Those a very solid bikes! Also impressed you're rolling with the non- e-mtb version . I haven't been mtbing for about 10 years (used to all the time) but my 2 year old son has been crazy into biking so I picked up a Scott Spark 960 on sale and one of those Kids Ride Shotgun seats....been an absolute blast on XC trails with him. Although, on those climbs I wish I had a e-bike lol 35 extra pounds on the front certainly doesn't make it easy 

 

Anyways thanks for entertaining the rabbit trail...back to insurance! 

[Sweet]

40 minutes ago, dealraker said:

I have two nearly identical Specialized Epic Evo bikes, one a 2022 and the other a 2023.  Of course I just ride cross country trails so light weight for me at my age is important.  Both bikes weigh in at slightly sub 22 lbs, both have 120mm suspension up front and 110 in the rear.   I'm very happy to do a 10 mile - about 1 hour - ride and go home these days LOL.  In the past that wouldn't have begun to keep me satisfied. 

 

https://www.specialized.com/us/en/epic-evo-pro/p/199657?color=319952-199657

There was a guy in my old gym, who unfortunately passed away with cancer.  He was a grumpy on first meeting type of guy, but when you got to know him he was very funny and mellow, quite the opposite from his gruff first impressions.  Anyway, he told me the story about getting into mountain biking, and when he told me the cost of the bike my jaw nearly hit the floor.  It was comparable to the price of bike you posted, which at the time was multiple times the cost of my car - still is more expensive than the car I drive.  My abiding memory of the guy was that he was living in fear that his wife would find out the price of the bike, she had no clue if was worth many thousands, and couldn’t understand why he was so precious of it.  I’ve come to realise that bikers have bikes as expensive and very often the true price is secret from the misses.

[Sweet]

22 minutes ago, Castanza said:

Kids Ride Shotgun seats

Never heard of these before, must get one.

[LC]

5 minutes ago, Sweet said:

Anyway, he told me the story about getting into mountain biking, and when he told me the cost of the bike my jaw nearly hit the floor

 

We call them dentist bikes

[Sweet]

6 minutes ago, LC said:

 

We call them dentist bikes

Ohhhh…. Maybe get a gum shield too lol