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

[dwy000]

4 hours ago, longterminvestor said:

 

The GOAT, Mr. Warren Buffett himself, is saying to grow GEICO, we can not do it ourselves.  We, GEICO, can afford to pay the broker rake.  So after 85 years of  fiercely advocating the selling/servicing insurance using our own employee force, "direct channel", GEICO is waiving the white flag and turning to the insurance brokerage distribution channel with a mega phone.

 

Watch the video.  It is a plead to insurance brokers.  This is an insurance company we all know - this is not "Shifting Sands Mutual".  This is GEICO saying "Mr. Broker, sir, we respect your specialized support, customers turn to you for expertise, customers depend on you, you can depend on us, we promise to be your true partner, we want your business".  Notice the positioning.  GEICO respects the business is owned by the broker and the broker can move it to who ever and where ever they want. 

 

There is another side to this coin...the dark/hard market...what Mr. Ajit Jain and Mr. Buffett really love, when the insurance companies set the rules/price.  Think toughest risk imaginable, asbestos, hurricanes, wild fire, those are the markets where the biggest ego brokers are rolling around on the ground begging to get someone to write it.  Those markets exist and will happen in future...brokers still win because the premiums are larger and broker comp is tied to premium...inflation protected.  

 

come on......is this evidence insurance companies need brokers?  I don't know what could be more of a smoking gun. 

 

 

I would have to imagine this broker driven business is necessary but will always be a small fraction of the total, yes?  Throwing 15% broker fees in there either kills margins or increases rates they have to charge, especially if theyre competing against other directs like Progressive. 

Edited September 20, 2025 by dwy000

[Spekulatius]

17 minutes ago, dwy000 said:

I always took that to be the case or otherwise you wouldnt need the bifurcation. If shares are better or the same as LP units (and theyre convertible), cleaning up the cap structure benefits everybody.  So the LP holders must have tax benefits from being invested in an LP instead of stock.  This is the same structure, I believe, as Baldwin too.

IBKR has the same structure. I think it’s a problem if  LP units are >> than C- Corp shares.

[dealraker]

10 hours ago, dwy000 said:

I always took that to be the case or otherwise you wouldnt need the bifurcation. If shares are better or the same as LP units (and theyre convertible), cleaning up the cap structure benefits everybody.  So the LP holders must have tax benefits from being invested in an LP instead of stock.  This is the same structure, I believe, as Baldwin too.

I guess my best wording is that it continually jolts me given how much all benefit from a successfully run insurance broker that things like this LP structure slide in to the model.  "I'm bored...let's cheat" seems appropriate.

[Spekulatius]

3 hours ago, dealraker said:

I guess my best wording is that it continually jolts me given how much all benefit from a successfully run insurance broker that things like this LP structure slide in to the model.  "I'm bored...let's cheat" seems appropriate.

The LP structure has tax advantages (pass through of distributions are tax free) C- crop shares are more liquid. With the bifurcation , the LP holders get the best of both worlds (due to the ability to convert unit into shares) and the c- corp shares holders sort of pay for it (in my simplified view).

 

Its not that big of a probes if LP shares are a small percentage of the capital structures, but it is a big one if  LP units re a large percentage like with RYAN.  Over time, it’s going to be less of an issue as units are converted into shares though.

Edited September 20, 2025 by Spekulatius

[longterminvestor]

I had previously promised a post on ERIE and a new thread in "Investment Ideas" started under ERIE.  I posted commentary there, hope its helpful.  cheers!

[lnofeisone]

On 9/20/2025 at 10:17 AM, Spekulatius said:

The LP structure has tax advantages (pass through of distributions are tax free) C- crop shares are more liquid. With the bifurcation , the LP holders get the best of both worlds (due to the ability to convert unit into shares) and the c- corp shares holders sort of pay for it (in my simplified view).

 

Its not that big of a probes if LP shares are a small percentage of the capital structures, but it is a big one if  LP units re a large percentage like with RYAN.  Over time, it’s going to be less of an issue as units are converted into shares though.

Worth deliniating here a little. RYAN lp units have TRAs. That's more than tax pass through. RYAN is on the hook for an aggregate of 450M in cash anytime oneof the LPs converts to common. 

[pricingpower]

Any views on the upcoming Neptune Insurance IPO?  Ticker NP.  They're a MGA "managing general agent" business model focused on resi flood insurance, pretty similar profile as insurance brokers although don't think there are any other public in the US...  they take a % fee for underwriting and arranging while a capacity provider writes the actual insurance and handles claims.  Unit economics are a policy costs the consumer $1151 of which $695 goes to the provider (think Lloyds), $135 commission to a typically third party insurance agent and Neptune keeps $321 with pretty small incremental expenses as using AI based underwriting.  The lifetime loss ratio on what they've bound has run only ~25% so providers have built large cumulative underwriting gains to date.  Main competitor is the very political and subsidized NFIP government program with 90% of market where there's been some reform circa 2012 that makes private insurance more viable (meeting requirements for conforming mortgages in flood zones).  There's a deep uninsured market (FEMA calls it out of ~100mm buildings in US ~9mm buildings are a 1%+ odds of flooding where NFIP insures only 3.7mm and Neptune covers 245k).  Policies have been about 85% renewed but because prices are increasing premium retention has been ~98% so very predictable earning stream much like the brokers.  Probably going to IPO at a nosebleed valuation around a 30x EBITDA multiple as one of the rare AI infused companies that's been profitable since early days.

[dealraker]

For what it's worth, I bought several thousand shares of BWIN this week at about $27.5 average price.  I have little if any knowledge that would be helpful here, I simply follow the Wells Fargo writeups.

 

I have now significantly added to WTW, AON, BRO, bought RYAN, and bought RYAN in the last few months.  Insurance brokers have dominated for me  the last 31 years, and that has slightly now increased.  

 

As a right brained view I've seen a lot come and go wanting deep insight as to understanding this business and these companies, most who participate obsess as to the need to pinpoint the insurance cycle.  I've found it more profitable to buy the stocks and hold them thinking the relatively average valuations are actually undervaluations.

 

LOL this may or may not be wise thinking going foward!  My main holding is AJG which is well over 40% of my net worth.

 

 

Edited October 5, 2025 by dealraker

[EgonKuhn]

I can only find a reference to a "underweight" rating with raised target to 36 USD from Wells Fargo on July 10th. Is there something current with a more positive view from them since then @dealraker?

[dealraker]

42 minutes ago, EgonKuhn said:

I can only find a reference to a "underweight" rating with raised target to 36 USD from Wells Fargo on July 10th. Is there something current with a more positive view from them since then @dealraker?

My experience with Wells over many years is that they will accurately underweight a broker like BWIN whose stock price zoomed far ahead of logic to over $50, then keep that underweight rating for some time...often somewhat past what I would call (again) a "logical" time and valuation for change.  A good case in point of this was their (for years) under-weighting of WTW even not too long ago when the stock could be bought for $200 per share at a very low relative to the market cash earnings PE.  And the same happened with AON, that I bought before they changed their recommendation status from whatever to buy.  Forecast earnings were my focus.

 

So I was buying WTW in the sub $200 range a couple of years ago (ample discussion here with other involved) while Wells was evidently in process of changing their underweight to over-weight on a reasonably timely call as their forecast for earnings - which turned out to be accurate - indicated the stock should be bought.

 

BWIN is viewed by wells to be selling today for not too much above 10 times cash earnings a couple years from today and the stock is below that which Wells values them.  I think it is a logical buy.

 

It is likely Spekulatius (Ralf) will come forth with a very accurate and deeper analysis and concern as to RYAN's financials, and he did the same (both accurate and logical) as to WTW when he sold the stock he had bought (if my memory is correct).  I read all that Spek writes here on COBF and my portfolio has quite a few stocks of his recommendation.  Yet with things like the brokers, and this will include RYAN, BWIN, and WTW, I accept what Spek writes as accurate yet I buy the stocks anyway.

 

It has proven to be very profitable over time.  One of the things you will find in any investment forum, and actually with any investor and that includes our heralded forbearers Buffett and Munger, is that spilling out your takes as to investing will reveal the both fragile and often (in hindsight) under or over complexity of your investing model.  That I do here obviously.

 

My "style" is something developed over decades, decades where within me I figured out that over-analyzing was easily BY FAR the most costly thinking I ever did.  I'll even go so far as to mention Parsad, the man I have learned the most from here on COBF, that he has within him of course deeper understandings of things...but his delivery as to what he buys and when he buys it is quite logically simple--- and it obviously works.

 

So that's what I use here as to the brokers.  It is a personal method, not one to criticize those who go deep.  Viking can write literally books on Fairfax and I read it all.  But my decision to buy Fairfax over 30 years ago and to add to the stock multiple times was based on much simpler dynamics, things screaming out and perfectly obvious.

 

Rambling.  But again as I mention, any reveal of what makes any of us do what we do will over time eventually expose a weakness of thought - and this may very well be that!  LOL!

 

Not proofing this, conversation to me.

Edited October 5, 2025 by dealraker

[EgonKuhn]

Thank you very much for your description of how Wells Fargo typically works with regard to its ratings and your investment process. I have to admit, I really appreciate @Spekulatius ability to not only identify the core of the issue but also describe it succinctly. But I equally value your or @Parsad's ability to recognize patterns with decades of experience and then simply apply them consistently. That may look simple to an outsider or even to yourself, but ultimately, it isn't.

[Spekulatius]

Can anyone come up with a good reason why MMC is better buy than BRO currently? The valuation in terms of PE and FCF yield on equity seems to be about the same and BRO may even be a bit cheaper based on 2026 estimates. What I am sure of is that BRO has superior management compared to MMC. Other than diversification, I don’t see a compelling reason to add a new insurance broker holding rather than buy more BRO. I don’t own enough BRO yet that the position size worries me. 

[dwy000]

3 hours ago, dealraker said:

For what it's worth, I bought several thousand shares of BWIN this week at about $27.5 average price.  I have little if any knowledge that would be helpful here, I simply follow the Wells Fargo writeups.

 

I have now significantly added to WTW, AON, BRO, bought RYAN, and bought RYAN in the last few months.  Insurance brokers have dominated for me  the last 31 years, and that has slightly now increased.  

 

As a right brained view I've seen a lot come and go wanting deep insight as to understanding this business and these companies, most who participate obsess as to the need to pinpoint the insurance cycle.  I've found it more profitable to buy the stocks and hold them thinking the relatively average valuations are actually undervaluations.

 

LOL this may or may not be wise thinking going foward!  My main holding is AJG which is well over 40% of my net worth.

 

 

I bought some BWIN about 2 years ago and sold it shortly afterwards (for a small but lucky gain) after reading more on this thread and swapping to BRO.

 

They made one massive acquisition a couple of years ago and have a ton of debt, and more impactful, a huge amount of earn out payments on acquisitions that effectively would burn thru all cash for a couple of years.  That should be ending this year and most cash should now be dropping to the bottom line and allow for some debt repayment. That debt was also limiting their acquisition capacity so they may go back into acquisition mode now.  As @longterminvestor pointed out, their real strength is their MGA.  

 

They also have that confusing share structure where a large portion of the company continues to be held in partnership form and therefore the diluted share number is understated and only reflects like 70% (forget the actual number) ownership of the business.  So you have to adjust the cash flows per.share to recognize that and it made it overpriced when I looked at it. 

 

Long way of saying that now that the earnouts are largely done it could be an interesting play again. 

[EgonKuhn]

33 minutes ago, Spekulatius said:

Can anyone come up with a good reason why MMC is better buy than BRO currently? The valuation in terms of PE and FCF yield on equity seems to be about the same and BRO may even be a bit cheaper based on 2026 estimates. What I am sure of is that BRO has superior management compared to MMC. Other than diversification, I don’t see a compelling reason to add a new insurance broker holding rather than buy more BRO. I don’t own enough BRO yet that the position size worries me. 

I bought MMC solely for diversification, as they primarily serve a different customer segment. Since I'm still very new to the industry, I found this helpful in getting to know it better.

[dealraker]

1 hour ago, dwy000 said:

I bought some BWIN about 2 years ago and sold it shortly afterwards (for a small but lucky gain) after reading more on this thread and swapping to BRO.

 

They made one massive acquisition a couple of years ago and have a ton of debt, and more impactful, a huge amount of earn out payments on acquisitions that effectively would burn thru all cash for a couple of years.  That should be ending this year and most cash should now be dropping to the bottom line and allow for some debt repayment. That debt was also limiting their acquisition capacity so they may go back into acquisition mode now.  As @longterminvestor pointed out, their real strength is their MGA.  

 

They also have that confusing share structure where a large portion of the company continues to be held in partnership form and therefore the diluted share number is understated and only reflects like 70% (forget the actual number) ownership of the business.  So you have to adjust the cash flows per.share to recognize that and it made it overpriced when I looked at it. 

 

Long way of saying that now that the earnouts are largely done it could be an interesting play again. 

Good info.

 

[formthirteen]

 

https://www.valueinvestorsclub.com/idea/AON_PLC/6005081379

 

Quote

In the current environment we are attracted to defensive investments that will “win by not losing” (i.e. defensive, uncorrelated characteristics) or that are underappreciated AI beneficiaries (bear with me). AON is exciting because we think it checks both boxes: a boring, durable, secularly growing business alongside an aligned management team executing a margin expansion plan accelerated by AI. Importantly, because we see limited fundamental downside risk in a high-quality business (if we are wrong), we believe that the position can be sized and has the makings of a long-term compounder.

 

Quote

We believe the margin opportunity from investments in AON Business Services (“ABS” - think Danaher DBS) and AI is significantly underappreciated in the stock today. ~80% of AON’s cost structure is compensation. They are already shifting their workforce to lower-cost regions: ~25% of employees are already in ABS, and this could reach ~50%. This initiative could unlock ~$50K of savings per employee, representing 400-500 bps of margin upside.

 

[longterminvestor]

On 10/5/2025 at 10:59 AM, Spekulatius said:

Can anyone come up with a good reason why MMC is better buy than BRO currently? The valuation in terms of PE and FCF yield on equity seems to be about the same and BRO may even be a bit cheaper based on 2026 estimates. What I am sure of is that BRO has superior management compared to MMC. Other than diversification, I don’t see a compelling reason to add a new insurance broker holding rather than buy more BRO. I don’t own enough BRO yet that the position size worries me. 

Only takes I have for you without picking one over other:

- BRO is as close to "pure play" insurance brokerage as you can get vs. MMC being 37% "Consulting"

- MMC is a truly global business vs BRO being mostly US and some Europe (would say BRO is growing internationally)

- MMC has best of bread reinsurance broker "Guy Carp" where as BRO has little/no reinsurance brokerage

- MMC traditionally gone after institutional business under Marsh brand and in 2009 started building out a middle market brand called "MMA" which is a nice business tucked inside MMC vs BRO who has everything except a large institutional biz (they do have Beecher Carlson brand but small compared to MMC institutional clients), BRO really wants to own middle market

[tnathan]

On 10/5/2025 at 9:59 AM, Spekulatius said:

Can anyone come up with a good reason why MMC is better buy than BRO currently? The valuation in terms of PE and FCF yield on equity seems to be about the same and BRO may even be a bit cheaper based on 2026 estimates. What I am sure of is that BRO has superior management compared to MMC. Other than diversification, I don’t see a compelling reason to add a new insurance broker holding rather than buy more BRO. I don’t own enough BRO yet that the position size worries me. 

I think there is legitimate integration risk for BRO after their huge and outsized acquisition (vs past acquisitions). If they can't digest and integrate as quickly as planned it limits (1) The amount of additional M&A they might be able to do and (2) Makes further small / mid sized M&A less material to current size of the business. People love BRO for the inorganic engine its created, and if that is less effective or less material moving forward perhaps you give them a lower multiple.

 

All that said I'm not worried and its a top 5 position for me, but I've always been buying the entire group recently as well as ACGL, PGR on the carrier side. The market is still very fragmented and there is plenty of rollup opportunity, but prices are a bit inflated with PE getting into the game.

[EgonKuhn]

If I may ask a follow-up question @longterminvestor: what I found a bit surprising in the VIC pitch was the aspect that AON was presented as a case where the use of AI tools is expected to significantly expand margins. Has AON been particularly notable in the past for its intensive and successful application of new technologies – similar to, for example, PGR among P&C insurers? Given the competition between insurance brokers (here especially between AON and MMC), is it even plausible to assume a sustained increase in margins due to the use of technology?

[tnathan]

1 hour ago, EgonKuhn said:

Given the competition between insurance brokers (here especially between AON and MMC), is it even plausible to assume a sustained increase in margins due to the use of technology?

Margins are a factor of (1) Take rate from customers (either flat fee or as a % of premiums placed) (2) Cost to deliver service (headcount, technology, etc) ... AI should decrease cost to deliver service, and I don't see competition decreasing take rates. Take rates are more a factor of bargaining power over carriers and control of distribution and less on competition with other brokers (and hence why margins have gone up over time for brokers)

[EgonKuhn]

9 minutes ago, tnathan said:

Margins are a factor of (1) Take rate from customers (either flat fee or as a % of premiums placed) (2) Cost to deliver service (headcount, technology, etc) ... AI should decrease cost to deliver service, and I don't see competition decreasing take rates. Take rates are more a factor of bargaining power over carriers and control of distribution and less on competition with other brokers (and hence why margins have gone up over time for brokers)

Thanks for your perspective! Makes this industry even a more interesting case.

[longterminvestor]

1 hour ago, EgonKuhn said:

If I may ask a follow-up question @longterminvestor: what I found a bit surprising in the VIC pitch was the aspect that AON was presented as a case where the use of AI tools is expected to significantly expand margins. Has AON been particularly notable in the past for its intensive and successful application of new technologies – similar to, for example, PGR among P&C insurers? Given the competition between insurance brokers (here especially between AON and MMC), is it even plausible to assume a sustained increase in margins due to the use of technology?

Dont know who has the AI edge anywhere as a "non-tech" business leveraging AI, let alone insurance brokers trying to win the AI race.  I personally find it hard to trust any management who says they are leading in AI.  I do not definitively know if AON management is saying they have an AI edge, however the VIC write up is saying AON has an edge.  

 

What I do know is AON have a solid business advising on "how to take risk" rather than just "buy transactional insurance".  Use of AI can be helpful in designing a complicated risk taking/risk ceding arrangement with all the data to support models ect - the data to make risk based decisions will be gold in the AI race I believe - that data is proprietary and could get moaty over time.  All brokers have it, including AON, just depends who figures out how to leverage and use to grow topline.  

 

VIC article specifically speaks to AI being helpful in the service center, which could be true - I do not know.  But servicing insurance clients generally (think call center, 1-800) using AI does not seem like a moat - seems like a white label bot that any insurance broker can tap into.   My thoughts now and given the pace of change/innovation I reserve my right to change my opinion.

[EgonKuhn]

Thank you very much @longterminvestor! Always great to read your insight about everything insurance

[dealraker]

My adds to AON have been 15 times that of what I put into Baldwin.  Wells sees AON as the broker today with the most upside, earnings growth and some multiple expansion.  I'd agree with that, but the stock has moved some.  Post last quarter's earnings the stock went down briefly and Wells was all over it.

 

Again, I know a lot of you (and me too in 99% of instances) have little interest in what a firm like Wells would publish.  But also again, Wells has been "on it" for years.  A good example is their endless chant for years-and-years that AJG was not over-valued but under-valued, the correct analysis proven repeatedly.  They see AJG as still under-valued.

 

They do use cash earnings always and their stuff is always different from most.  AON is seen having $21.60 in cash earnings in 2027 by Wells.

[Spekulatius]

44 minutes ago, dealraker said:

They do use cash earnings always and their stuff is always different from most.  AON is seen having $21.60 in cash earnings in 2027 by Wells.

The tikr.com has $21.3 cash earnings for AON this year, close to the Wells #. AON seems to have a larger gap between the adjusted EPS ($16.93) and cash earnings ($21.3) than other insurance brokers? anyone has any idea why this is?

 

It could undervalue AON relative to other unless it’s an accounting quirk that won’t persist.

Edited October 6, 2025 by Spekulatius