Chicago, IL – March 25, 2025 – Today, Zacks Equity Research Equity areErie Indemnity Co. ERIE, Brown and Brown, Inc. BRO, Marsh & McLennan Companies MMC, Arthur J. Gallagher & Co. AJG and Aon plc AON.
Industry: Insurance Brokerage
Link: https://www.zacks.com/commentary/2433977/5-stocks-to-watch-from-the-thriving-insurance-brokerage-industry
The Zacks Insurance Brokerage industry is expected to benefit from better pricing, prudent underwriting, rising demand for insurance products and global expansion, which have been driving revenues. The fast-paced consolidations in this traditionally fragmented industry are expected to benefit Erie Indemnity Co., Brown and Brown, Inc., Marsh & McLennan Companies, Arthur J. Gallagher & Co. and Aon plc.
Increased digitization should help the industry improve its basis points, scale and efficiencies.
The Zacks Brokerage Insurance industry comprises companies primarily offering insurance and reinsurance products and services. Insurance brokers serve as intermediaries between clients and insurance providers, act on behalf of their clients and offer advice, keeping in mind clients' interests against brokerage fees. Their business is directly linked with clients’ level of business activity.
Some of these companies also provide risk management, third-party administration and managed healthcare services. Per a report by Mordor Intelligence, the insurance brokerage market size is projected at $331.96 billion in 2025 and is expected to reach $395.41 billion by 2030 at a CAGR of 3.56% during the forecast period (2025-2030). Accelerated digitalization should aid in the smooth functioning of the industry.
Increased Demand for Products to Drive Revenues: The operational results of industry players are dependent on clients’ level of business activity, which relies on the extent of economic activity in the industries and markets they serve. The growth of insurance brokers depends on the demand for insurance products driven by increased awareness.
Keeping this in mind, industry players are expanding globally, cross-selling products, improving pricing, tightening underwriting standards and designing products that are more appealing to customers and match their risk appetite. Better pricing ensures higher commissions for industry players.
An increase in the aging population is driving the demand for retirement benefit products, while the rising population of baby boomers and millennials and increasing awareness are boosting the demand for medical insurance, life insurance, accidental insurance and other forms of insurance. Per a report by Mordor Intelligence, the growing demand and awareness for insurance policies among people boost the growth of the insurance brokerage market.
Mergers and Acquisitions: The insurance brokerage industry is witnessing fast-paced consolidation. Per a report by Mordor Intelligence, the insurance brokerage market is driven by persistently growing mergers and acquisitions. The industry has traditionally been fragmented, with many small players. One of the factors driving mergers and acquisitions is that the companies need to specialize in their businesses.
Some other factors driving mergers and acquisitions are the interest of private equity firms in this sector, growing competition and slow organic growth. Per a report by Willis Towers Watson’s Quarterly Deal Performance Monitor, mid-market merger and acquisition activity is anticipated to increase in 2025 driven by increased margin pressure and inorganic growth as a means to boost digital transformation.
Increased Adoption of Technology: Insurance brokers are adopting digital tools for improved policy management, claims processing and better customer interactions. Insurance companies are teaming up with insurtech firms to accelerate the integration of innovative technologies like artificial intelligence (AI), machine learning, blockchain and IoT. The increased use of data analytics and AI integration enables brokers to offer personalized services, boost operational efficiency, improve risk assessment and streamline operations.
Accelerated digitization, robotic process automation, cognitive intelligence and blockchain should help insurers curb operational costs and aid margin expansion. This digital shift is expected to drive premium growth and boost efficiency. Per the Deloitte, insurers are likely to generate around $4.7 billion in annual global premiums from AI-related insurance by 2032, yielding a CAGR of nearly 80%. However, expenses associated with such investments increase the costs and, in turn, the expense ratio.
The Zacks Insurance - Brokerage industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #45, which places it in the top 18% of more than 247 Zacks industries.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, signifies encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are upbeat about this group’s earnings growth potential. The industry’s earnings estimate has moved up 3.3% for 2025 in a year.
Before we present a few insurance broker stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock market performance and valuation picture.
The Insurance Brokerage industry has outperformed its sector and the Zacks S&P 500 Composite over the past year. The stocks in this industry have collectively risen 27.7% in a year compared with the Finance sector’s jump of 16.1% and the Zacks S&P 500 Composite’s increase of 9.1% over the same period.
On the basis of a trailing 12-month price-to-book (P/B), commonly used for valuing insurance stocks, the industry is currently trading at 6.68X compared with the Zacks S&P 500 Composite’s 7.97X and the sector’s 4.06X.
Over the past five years, the industry has traded as high as 8.17X, as low as 4.96X and at the median of 6.84X.
We are presenting one stock from the space that currently carries a Zacks Rank #2 (Buy) and four stocks with a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Erie Indemnity: Erie, PA-based Erie Indemnity, with a market capitalization of $21.43 billion, operates as a managing attorney-in-fact for subscribers at the Erie Insurance Exchange in the United States. A focus on improving the combined ratio through rate increases, cost management, prudent underwriting, upgrade of legacy technology platforms and digitalization bodes well for growth.
The Zacks Consensus Estimate for 2025 earnings indicates a 24.9% year-over-year increase. The consensus estimate has risen 0.2% for 2025 in the past 30 days. ERIE delivered a four-quarter average surprise of 7.61%. Erie’s earnings have grown 14.8% in the past five years. It carries a Zacks Rank #2. The stock has risen 1.3% over the past year.
Brown & Brown: BRO, with a market capitalization of $33.89 billion and headquartered in Daytona Beach, FL, markets and sells insurance products and services primarily in the United States, as well as in London, Bermuda and the Cayman Islands and holds a Zacks Rank #3. New businesses, better customer retention, premium rate increases across the majority of business lines, strategic acquisitions and a strong financial position should continue to drive growth for this insurer.
Brown & Brown’s earnings have grown 21.5% in the past five years, better than the industry average of 15.2%. The expected long-term earnings growth rate is 9.1%. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates an 8.8% and 9.8% year-over-year increase, respectively. BRO delivered a trailing four-quarter earnings surprise of 8.18%, on average. The consensus estimate for 2025 earnings has moved 1.7% and 2.2% north, respectively, in the past 60 days. The stock has rallied 38% over the past year.
Marsh & McLennan Companies: New York-based Marsh & McLennan, with a market capitalization of $114.09 billion, provides advice and solutions to clients in the areas of risk, strategy and people worldwide. This insurance broker is well-poised to grow on significant investments and acquisitions made within its operating units, product launches, enhanced digital capabilities and new businesses. It currently carries a Zacks Rank #3.
Marsh & McLennan’s earnings have grown 13.4% in the past five years. The expected long-term earnings growth rate is 8.6%. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates an 8.9% and 9.1% year-over-year increase, respectively. The consensus estimate for 2025 earnings has moved 1.2% and 2% north, respectively, in the past 60 days. This insurance broker delivered a trailing four-quarter earnings surprise of 3.13%, on average. The stock has jumped 14.4% over the past year.
Arthur J. Gallagher: Headquartered in Itasca, IL, Arthur J. Gallagher, with a market capitalization of $84.50 billion, is the world’s largest property/casualty third-party claims administrator and the fourth largest among insurance brokers (based on revenues). AJG is poised to benefit from the growing contribution of its Brokerage and Risk Management segments. This is driving organic revenues.
Given the number and size of its non-U.S. acquisitions, this Zacks Rank #3 insurer expects an increase in international contribution to total revenues. New business production and retention bode well for consistent growth. In the risk management segment, the company expects organic in the 6%-8% range and margins around 20.5% in 2025. The brokerage segment’s organic growth is expected in the 6% to 8% range.
Arthur J. Gallagher’s earnings have grown 20.4% in the past five years, better than the industry average of 15.2%. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates a 14.5% and 15% year-over-year increase, respectively. The consensus estimate for 2025 and 2026 earnings has moved 0.1% and 0.3% north, respectively, in the past 30 days. This insurance broker has a solid track record of beating earnings estimates in three of the last four quarters and matching in one, the average being 2.25%. The stock has rallied 35.1% over the past year.
Aon: Dublin, Ireland-based Aon, with a market capitalization of $84.31 billion, offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. The divestiture of non-core operations to streamline its business and deepen its focus on more profitable operations generates a higher return on equity. This, along with cost-curbing measures, bodes well for growth. Aon has an impressive inorganic story.
This Zacks Rank #3 company mainly looks to expand in the health and benefits business, flood insurance solutions, and risk and insurance solution operations.
Aon’s earnings have grown 11.4% in the past five years, while the expected long-term earnings growth rate is 10.7%. The Zacks Consensus Estimate for 2025 and 2026 earnings indicates a 9.9% and 12.6% year-over-year increase, respectively. This insurance broker has a solid track record of beating earnings estimates in two of the last four quarters and missing in two, the average being 1.67%. The stock has advanced 19.2% over the past year.
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Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
Aon plc (AON) : Free Stock Analysis Report
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Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Erie Indemnity Company (ERIE) : Free Stock Analysis Report
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