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

[rogermunibond]

FT on the very soft insurance market

 

 

https://giftarticle.ft.com/giftarticle/actions/redeem/ec8c2ca1-1026-43cc-b91b-bbffcba72dd8

Edited June 16 by rogermunibond

[longterminvestor]

Maybe this will help folks understand of hard/soft market cycles.  Insurance market "hard vs soft" is identical to stock market "bull vs bear". Bull Market = Soft Market attitudes, Bear Market = Hard Market attitudes. 

 

In a Soft market, underwriters lose their minds, make irrational decisions with regards to fundamentals, no fear - everything is rosy, care free, underwriters say "YES" alot and "everyone is making money" attitude persists. In a soft market, the old school underwriters say "this can not go on forever" and the new guys say "you guys are dinosaurs, we are killing it".....until the roof falls in...or doesn't...thats the bet.  Soft market means terms conditions get sweeter and price goes down = bad equation for insurance companies.  and brokers have a field day because they are getting BETTER market execution for their clients albeit commission revenue does compress HOWEVER good brokers can sell more product into a soft market cycle.  In a soft market, as a broker you just send an underwriter a competitor quote and say "youre gonna let this other idiot make all the money?" BOOM, they match or beat the price and in many cases they will increase the commission to sell their deal.  Brokers really don't do a good job in soft markets for their clients because price alone is what the clients care about but a good broker can enhance the terms and conditions to the paper contract in a soft market with ease.  

 

A Hard market on the other hand, underwriters set the price, terms, conditions cause they know they are winning.  Imagine being an underwriter for financial D&O for banks in 2007.  You could put out quotes with a bankruptcy exclusion for a bank in a D&O policy and win!  That defines what underwriters CAN DO in a hard market.  Hard market you can put a roof exclusion on a property policy and client will still buy it.  NUTZ right?  Buyers/Brokers loose their minds in a hard market because things get tough, every underwriter says no.  Gotta stick with your partners through the cycles.  Its an amazing game.

 

Mr. Buffett wins in a hard market.  because he knows the risk is the same, its just he can charge more in a hard market.  Think of it this way, does the hurricane know its a hard market when its coming to Florida or Texas?  The hurricane doesn't care!  It's coming (or not coming) just the same.  The odds are the same either way, its the capacity being put into the market that drives drive up or down, hard or soft.  

 

Its just like stocks, the market doesn't know what you paid for the stock as much as you stare at it and fondle it, the price of the equity will go where it goes based on fear and greed or fundamentals of a good/great business.  Just like the insurance cycles hard vs. soft.  A good risk is a good risk whether its a hard or soft market, good risks just get better execution.  

 

ALL stock brokers look like kings in a bull market, just like insurance brokers look like kings in a soft market.  The inverse its true as well for bear market/hard market.  Dumb money shows up in a soft market.  Smart money waits for the hard market.  They very much rhyme.   

Edited June 17 by longterminvestor

[Libs]

1 hour ago, longterminvestor said:

Maybe this will help folks understand of hard/soft market cycles.  Insurance market "hard vs soft" is identical to stock market "bull vs bear". Bull Market = Soft Market attitudes, Bear Market = Hard Market attitudes. 

 

In a Soft market, underwriters lose their minds, make irrational decisions with regards to fundamentals, no fear - everything is rosy, care free, underwriters say "YES" alot and "everyone is making money" attitude persists. In a soft market, the old school underwriters say "this can not go on forever" and the new guys say "you guys are dinosaurs, we are killing it".....until the roof falls in...or doesn't...thats the bet.  Soft market means terms conditions get sweeter and price goes down = bad equation for insurance companies.  and brokers have a field day because they are getting BETTER market execution for their clients albeit commission revenue does compress HOWEVER good brokers can sell more product into a soft market cycle.  In a soft market, as a broker you just send an underwriter a competitor quote and say "youre gonna let this other idiot make all the money?" BOOM, they match or beat the price and in many cases they will increase the commission to sell their deal.  Brokers really don't do a good job in soft markets for their clients because price alone is what the clients care about but a good broker can enhance the terms and conditions to the paper contract in a soft market with ease.  

 

A Hard market on the other hand, underwriters set the price, terms, conditions cause they know they are winning.  Imagine being an underwriter for financial D&O for banks in 2007.  You could put out quotes with a bankruptcy exclusion for a bank in a D&O policy and win!  That defines what underwriters CAN DO in a hard market.  Hard market you can put a roof exclusion on a property policy and client will still buy it.  NUTZ right?  Buyers/Brokers loose their minds in a hard market because things get tough, every underwriter says no.  Gotta stick with your partners through the cycles.  Its an amazing game.

 

Mr. Buffett wins in a hard market.  because he knows the risk is the same, its just he can charge more in a hard market.  Think of it this way, does the hurricane know its a hard market when its coming to Florida or Texas?  The hurricane doesn't care!  It's coming (or not coming) just the same.  The odds are the same either way, its the capacity being put into the market that drives drive up or down, hard or soft.  

 

Its just like stocks, the market doesn't know what you paid for the stock as much as you stare at it and fondle it, the price of the equity will go where it goes based on fear and greed or fundamentals of a good/great business.  Just like the insurance cycles hard vs. soft.  A good risk is a good risk whether its a hard or soft market, good risks just get better execution.  

 

ALL stock brokers look like kings in a bull market, just like insurance brokers look like kings in a soft market.  The inverse its true as well for bear market/hard market.  Dumb money shows up in a soft market.  Smart money waits for the hard market.  They very much rhyme.   

 

 

Great post. I've lived in both worlds- work for Chubb from '85-99, then as an FA from '99- now. There are definitely parallels.

[gfp]

Unusual trading in the final half hour today in Baldwin Insurance Group - BWIN

 

Either a short squeeze or someone heard a rumor (I guess it could be both things simultaneously) 

[adventurer]

On 6/17/2026 at 8:58 PM, longterminvestor said:

Maybe this will help folks understand of hard/soft market cycles.  Insurance market "hard vs soft" is identical to stock market "bull vs bear". Bull Market = Soft Market attitudes, Bear Market = Hard Market attitudes. 

 

In a Soft market, underwriters lose their minds, make irrational decisions with regards to fundamentals, no fear - everything is rosy, care free, underwriters say "YES" alot and "everyone is making money" attitude persists. In a soft market, the old school underwriters say "this can not go on forever" and the new guys say "you guys are dinosaurs, we are killing it".....until the roof falls in...or doesn't...thats the bet.  Soft market means terms conditions get sweeter and price goes down = bad equation for insurance companies.  and brokers have a field day because they are getting BETTER market execution for their clients albeit commission revenue does compress HOWEVER good brokers can sell more product into a soft market cycle.  In a soft market, as a broker you just send an underwriter a competitor quote and say "youre gonna let this other idiot make all the money?" BOOM, they match or beat the price and in many cases they will increase the commission to sell their deal.  Brokers really don't do a good job in soft markets for their clients because price alone is what the clients care about but a good broker can enhance the terms and conditions to the paper contract in a soft market with ease.  

 

A Hard market on the other hand, underwriters set the price, terms, conditions cause they know they are winning.  Imagine being an underwriter for financial D&O for banks in 2007.  You could put out quotes with a bankruptcy exclusion for a bank in a D&O policy and win!  That defines what underwriters CAN DO in a hard market.  Hard market you can put a roof exclusion on a property policy and client will still buy it.  NUTZ right?  Buyers/Brokers loose their minds in a hard market because things get tough, every underwriter says no.  Gotta stick with your partners through the cycles.  Its an amazing game.

 

Mr. Buffett wins in a hard market.  because he knows the risk is the same, its just he can charge more in a hard market.  Think of it this way, does the hurricane know its a hard market when its coming to Florida or Texas?  The hurricane doesn't care!  It's coming (or not coming) just the same.  The odds are the same either way, its the capacity being put into the market that drives drive up or down, hard or soft.  

 

Its just like stocks, the market doesn't know what you paid for the stock as much as you stare at it and fondle it, the price of the equity will go where it goes based on fear and greed or fundamentals of a good/great business.  Just like the insurance cycles hard vs. soft.  A good risk is a good risk whether its a hard or soft market, good risks just get better execution.  

 

ALL stock brokers look like kings in a bull market, just like insurance brokers look like kings in a soft market.  The inverse its true as well for bear market/hard market.  Dumb money shows up in a soft market.  Smart money waits for the hard market.  They very much rhyme.   

Thank you.

 

1. In that case insurance brokers may prove to be a decent investment during hard markets (low stock price due to lower earnings) assuming the cycle will reverse at some point in time, correct? As a simplified approach.  

 

2. Are insurance brokers antagonistic towards insurance companies in general? Also a simplified thought: could you consider insurance brokers as a hedge against an exposure in insurance companies? 

Edited June 19 by adventurer

[dealraker]

Rapid rate increases, long length of time rate increases, and expanding broker stock PE multiples - while the "how long" isn't known...these guarantee other side-of-the-mountain outcomes.  Wasn't intrinsic value actually being pressured downwards by sure-to-be-reversed or stagnated rate escalation - unsustainable rate increases?  When the stock price of AJG for instance was getting higher and higher PE multiples...wasn't the future obvious - but timeline unknown?

 

Stock prices

Intrinsic value growth

Rate cycle

 

I think the three above move separately, not in unison.  Isn't the best time to invest in times of violent rate decline times, when stock prices have been clobbered?  It seems to me the progress of the business is much more steady than rates or stock prices.  The business is emotionally stable; rates are "party late" and "sleep in" by nature; and stock prices are clearly manic depressive. 

 

Time of change for the three?  Somewhat unknown, but the past is likely to give guidance.

 

We also have AI affecting likely all three of the above, or at least it eventually will.  I label this 100% unknown as to its affect.

[longterminvestor]

16 hours ago, gfp said:

Unusual trading in the final half hour today in Baldwin Insurance Group - BWIN

 

Either a short squeeze or someone heard a rumor (I guess it could be both things simultaneously) 

article is behind a paywall.  when it went to print, speculators followed hence the volume/price spike.

 

https://www.insuranceinsiderus.com/login-access?returnUrl=%2F&zephr_sso_ott=rhsIeg

Edited June 19 by longterminvestor

[dwy000]

52 minutes ago, longterminvestor said:

article is behind a paywall.  when it went to print, speculators followed hence the volume/price spike.

 

https://www.insuranceinsiderus.com/login-access?returnUrl=%2F&zephr_sso_ott=rhsIeg

Would love to see how thats going to work if they're serious.  They have $1.5bn of debt already and are still paying earn outs.  To take private would probably require $2.2bn of capital and they dont have the cash flow to cover almost any of that using debt.  It would also take them out of the acquisition market for years.

 

They made a massive acquisition at peak multiples and have watched industry valuations halve.  Probably a lot of very.frustrated insiders saying "do something"

[longterminvestor]

Hub International files for IPO.  Top 10 brokerage firm globally.  When there is more info available, will do more of a deep dive.  1 of many articles below:

 

https://www.insurancebusinessmag.com/us/news/breaking-news/hub-international-files-for-ipo--whats-it-worth-580619.aspx

Edited yesterday at 10:55 AM by longterminvestor

[Spekulatius]

FWIW, I reduced RYAN. The stock has recovered some but I did not like their last few earnings.

Lost a small a out of money on that one (bought in too early and don’t add enough when it went lower).

[Whensthepaintdry?]

I’m having trouble posting the link, but the never sell podcast with MBI and Scuttleblurb recently talked about Ryan. 

[longterminvestor]

Thanks.  Found it:

 

https://podcasts.apple.com/us/podcast/scuttleslops-openai-valuation-ryan-specialty/id1786912203?i=1000774614060

[dealraker]

47 minutes ago, longterminvestor said:

Hub International files for IPO.  Top 10 brokerage firm globally.  When there is more info available, will do more of a deep dive.  1 of many articles below:

 

https://www.insurancebusinessmag.com/us/news/breaking-news/hub-international-files-for-ipo--whats-it-worth-580619.aspx

It was a bad day for public shareholders when Hub went private,  the "pop" was typically celebrated but sorely disappointing.  Back it comes.

[dealraker]

16 minutes ago, Spekulatius said:

FWIW, I reduced RYAN. The stock has recovered some but I did not like their last few earnings.

Lost a small a out of money on that one (bought in too early and don’t add enough when it went lower).

I bought BWIN for the two trusts I'm messing with and stuck with it.  Up 33 percent but bought very little so it is not meaningful.  I had bought AJG a couple years ago in both at $185 and now I'm game for a bit more of the brokers in these trusts.  Decisions.

[Spekulatius]

5 hours ago, dealraker said:

I bought BWIN for the two trusts I'm messing with and stuck with it.  Up 33 percent but bought very little so it is not meaningful.  I had bought AJG a couple years ago in both at $185 and now I'm game for a bit more of the brokers in these trusts.  Decisions.

I would rather buy more AJG but I don’t own as much of it than you do.

 

RYAN traded at a substantial premium to other brokers due to faster growth but the latter has largely evaporated.

[dwy000]

11 hours ago, longterminvestor said:

Hub International files for IPO.  Top 10 brokerage firm globally.  When there is more info available, will do more of a deep dive.  1 of many articles below:

 

https://www.insurancebusinessmag.com/us/news/breaking-news/hub-international-files-for-ipo--whats-it-worth-580619.aspx

Interesting that they waited until a multi year low in broker multiples to IPO.  If they'd done it 18 months ago the same results might have received double the value. 

 

And doing it at the same time that BWIN is rumored to consider going private again.  

Edited 12 hours ago by dwy000

[Red Lion]

1 hour ago, dwy000 said:

Interesting that they waited until a multi year low in broker multiples to IPO.  If they'd done it 18 months ago the same results might have received double the value. 

 

And doing it at the same time that BWIN is rumored to consider going private again.  

 

Maybe they're trying to sail through any type of insider lockup so they can start dumping shares on the market when multiples improve?

[longterminvestor]

16 hours ago, longterminvestor said:

Thanks.  Found it:

 

https://podcasts.apple.com/us/podcast/scuttleslops-openai-valuation-ryan-specialty/id1786912203?i=1000774614060

Listened to this podcast, RYAN section only.  I'm, self admittedly, a tough critic.  They are directionally correct with a few things however they make assumptions that are not accurate.  Again, bodes to the thesis that distribution and the consumption of P&C insurance is greatly mis-understood.  Property Casualty insurance overall is just mis-understood.  There are just mechanics to insurance that are 3 & 4 layers deep that can confuse the highly intelligent investors/buyers of insurance which supports a role for brokers in the digital world for the foreseeable future.  

 

One assumption made was "Admitted vs. E&S" and why business flows into those marketplaces respectively.  #1 - Every broker is incentivized to place business in the admitted market.  Typically, not always, but typically an admitted placement has no wholesaler so theres no split on commission.  There are certain niches/carriers who pay as high as 22%-25% commission and as a retailer placing that direct, there is no split with wholesaler - typical commission is 15%-17.5% admitted - E&S varies but 10%-12% net to retailer and 7.5%-10% net to wholesaler (Gross 17.5% to 22% is norm in wholesale + FEES....many transactional E&S policies have a $250/$500 fee in addition to commission that goes to wholesaler - some have $2500/$5000 placement fees).  The extra kicker is the contingent commissions paid as well in both scenarios - when retail places admitted direct - contingents go to retailer, when placed wholesale - contingents paid to wholesaler.  The reason for "preferred wholesalers" is driven by an arrangement with retail/wholesale where there could be a split on contingents so naturally a retailer will want to load up with 1 wholesaler if the retailer participates on contingents placed thru wholesale channel. Bored yet?  Putting folks to sleep?  Probably....thats the opportunity...insurance transaction usually just ends with "okay, lets just buy this already and deal with it next year.  Its so odd actually.  

 

Its true not every retail agency can have the expertise to write up every deal that comes across the desk so naturally a wholebroker is engaged to work on accounts where no admitted market will write OR a retailer does not have an agreement to place with the admitted market who potentially could write that business.  But the retailer will not "disclose" to buyer of insurance "Hey, I know XYZ admitted carrier can write this well for you but we do not have an agreement to place business with them so I recommend you call Bob down the street, he can help you and I will pass".  That never happens, the retailer will just send deal to E&S market and put a deal together, and if the relationship with client/broker is decent and the price is right - the deal will trade E&S.   

 

When a large broker purchases an agency, the first thing they are gonna do is cull the E&S book and see what admitted's will offer terms on whats already there.  The accretion on revenue is significant.  Recently acquired broker who has $10M of premium spend E&S and getting paid 10% ($1M revenue), if that can be rolled admitted, and make 15%-17.5% or even 20%, that is a large increase in revenue for the recently acquired shop to a favored admitted carrier who has a large relationship with admitted XYZ carrier and immediately appoints newly acquired retailer.  In those situations, folks like RYAN, AmWins, RPS, Bridge - will lose - but retail broker/client win.  

 

Directionally correct because E&S has been growing significantly over the past 7-10 years.  Mostly because the playbook relies on a lazy retailer.  Theres lost of follow up and convincing that needs to happen to get an admitted carrier to write "new" business - they just ask lots of questions (they are underwriters...obviously they ask questions).  But many times an E&S brokered deal can be put together faster so if speed is the game, E&S is the cure.  RYAN, AmWins, CRC have been building an army of sales folks getting weekly meetings with retailers saying "let us do the placement of coverage, you manage the client relationship."  

[gfp]

5 hours ago, longterminvestor said:

Listened to this podcast, RYAN section only.  I'm, self admittedly, a tough critic.  They are directionally correct with a few things however they make assumptions that are not accurate.  Again, bodes to the thesis that distribution and the consumption of P&C insurance is greatly mis-understood.  Property Casualty insurance overall is just mis-understood.  There are just mechanics to insurance that are 3 & 4 layers deep that can confuse the highly intelligent investors/buyers of insurance which supports a role for brokers in the digital world for the foreseeable future.  

 

One assumption made was "Admitted vs. E&S" and why business flows into those marketplaces respectively.  #1 - Every broker is incentivized to place business in the admitted market.  Typically, not always, but typically an admitted placement has no wholesaler so theres no split on commission.  There are certain niches/carriers who pay as high as 22%-25% commission and as a retailer placing that direct, there is no split with wholesaler - typical commission is 15%-17.5% admitted - E&S varies but 10%-12% net to retailer and 7.5%-10% net to wholesaler (Gross 17.5% to 22% is norm in wholesale + FEES....many transactional E&S policies have a $250/$500 fee in addition to commission that goes to wholesaler - some have $2500/$5000 placement fees).  The extra kicker is the contingent commissions paid as well in both scenarios - when retail places admitted direct - contingents go to retailer, when placed wholesale - contingents paid to wholesaler.  The reason for "preferred wholesalers" is driven by an arrangement with retail/wholesale where there could be a split on contingents so naturally a retailer will want to load up with 1 wholesaler if the retailer participates on contingents placed thru wholesale channel. Bored yet?  Putting folks to sleep?  Probably....thats the opportunity...insurance transaction usually just ends with "okay, lets just buy this already and deal with it next year.  Its so odd actually.  

 

Its true not every retail agency can have the expertise to write up every deal that comes across the desk so naturally a wholebroker is engaged to work on accounts where no admitted market will write OR a retailer does not have an agreement to place with the admitted market who potentially could write that business.  But the retailer will not "disclose" to buyer of insurance "Hey, I know XYZ admitted carrier can write this well for you but we do not have an agreement to place business with them so I recommend you call Bob down the street, he can help you and I will pass".  That never happens, the retailer will just send deal to E&S market and put a deal together, and if the relationship with client/broker is decent and the price is right - the deal will trade E&S.   

 

When a large broker purchases an agency, the first thing they are gonna do is cull the E&S book and see what admitted's will offer terms on whats already there.  The accretion on revenue is significant.  Recently acquired broker who has $10M of premium spend E&S and getting paid 10% ($1M revenue), if that can be rolled admitted, and make 15%-17.5% or even 20%, that is a large increase in revenue for the recently acquired shop to a favored admitted carrier who has a large relationship with admitted XYZ carrier and immediately appoints newly acquired retailer.  In those situations, folks like RYAN, AmWins, RPS, Bridge - will lose - but retail broker/client win.  

 

Directionally correct because E&S has been growing significantly over the past 7-10 years.  Mostly because the playbook relies on a lazy retailer.  Theres lost of follow up and convincing that needs to happen to get an admitted carrier to write "new" business - they just ask lots of questions (they are underwriters...obviously they ask questions).  But many times an E&S brokered deal can be put together faster so if speed is the game, E&S is the cure.  RYAN, AmWins, CRC have been building an army of sales folks getting weekly meetings with retailers saying "let us do the placement of coverage, you manage the client relationship."  

 

Thanks - a really great post as always.  Little by little I am receiving my education on this industry from you!