In this article, we will explore the 7 best insurance brokerage stocks to invest in now.
The Insurance Brokerage Market: An Overview
The insurance brokerage market serves as an important link between insurance companies and clients, helping individuals and businesses find the right insurance coverage. Brokers act as intermediaries, offering a wide range of services that include risk assessment, policy selection, and claims assistance. As regulations evolve and new risks emerge, the role of brokers becomes even more crucial in ensuring that clients are adequately protected.
This market has been expanding rapidly. According to Grand View Research, the global insurance brokerage market was valued at $287.40 billion in 2023. Looking forward, the market is expected to grow at a compound annual growth rate (CAGR) of 9.2% during 2024-2030 to reach $524.80 billion by the end of the forecast period.
The North American insurance brokerage market was the largest in the world in 2023, accounting for 30.5% of the total revenue. This growth is largely driven by regulatory changes and increasing compliance requirements in the region. As businesses strive to avoid the risks associated with non-compliance, the demand for brokerage services continues to rise.
A key trend driving market growth is the integration of technologies like artificial intelligence (AI) and data analytics, which are transforming the industry. These tools help brokers streamline processes, improve risk assessments, and enhance customer service.
First Rate Drop in Seven Years?
On October 24, Reuters reported that global commercial insurance rates fell by 1% in the third quarter of 2024. This marks the first quarterly decline in seven years, as noted by the Global Insurance Market Index from Marsh. The index tracks renewal rate changes across four main categories of commercial insurance: property, casualty, cyber, and financial & professional lines. Marsh indicated that the decrease in composite rates was mainly due to increased competition among insurers in the global property market.
Regionally, the average composite rates experienced a significant reduction, with a 6% drop in the Pacific region, 5% in the UK, 4% in Asia, 3% in Canada, and 2% in India, the Middle East, and Africa. In contrast, rates remained flat in Europe and increased by 3% in both the US and the Latin America and the Caribbean (LAC) region.
Property insurance rates globally decreased by 2%. Financial and professional lines experienced a notable drop of 7%, marking the ninth consecutive quarter of declines in this category. Cyber insurance rates also fell by 6%, consistent with the previous 2 quarters. However, casualty insurance was the only major product line to see an increase, rising by 6% globally after several quarters of growth. Pat Donnelly, President of Marsh Specialty and Global Placement, described these rate reductions as a positive development for clients.
For insurance brokers, this presents both challenges and opportunities. A decrease in rates can indicate a shift in market conditions, which could lead to increased competition among brokers as they adjust their strategies to attract clients. Lower rates may also make insurance more affordable for more customers, encouraging them to purchase coverage or expand their existing policies.
With this background in mind, let’s take a look at the 7 best insurance brokerage stocks to invest in now.
A Professional insurance broker discussing coverage plans with a small business owner.
Methodology
To compile our list of the 7 best insurance brokerage stocks to invest in now, we used the Finviz and Yahoo stock screeners to find insurance brokerage companies. We also reviewed our own rankings and consulted various online resources. From an initial pool of more than 20 insurance brokerage stocks, we focused on the top 7 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 best insurance brokerage stocks to invest in now are ranked in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Insurance Brokerage Stocks to Invest in Now
7. eHealth Inc. (NASDAQ:EHTH)
Number of Hedge Fund Holders: 19
eHealth Inc. (NASDAQ:EHTH) is an American online health insurance marketplace that connects individuals with various health insurance options. As an independent health insurance advisor, the company provides a platform where users can compare plans from over 180 insurers, helping them find coverage that fits their needs and budgets. The company’s licensed benefit advisors are available to assist clients in navigating the selection process, ensuring they understand their options.
In the second quarter of 2024, eHealth Inc. (NASDAQ:EHTH) reported total revenue of $65.9 million, a slight decline of 1% compared to the same quarter in the previous year. However, excluding tail revenue, the company saw a 13% increase in total revenue year-over-year. The Medicare segment was particularly strong, generating $59.2 million in revenue, which is a 7% increase from Q2 2023. This growth reflects eHealth’s (NASDAQ:EHTH) effective strategies in capturing market share within the Medicare space.
The company is also focused on enhancing its user experience through various initiatives. In the Q3 2024 earnings call, the company’s management shared that eHealth Inc. (NASDAQ:EHTH) is updating its comparison tools to provide more personalized recommendations based on individual needs. Additionally, the expansion of its video enrollment tool, Live Advise, aims to improve client interactions by combining convenience with a personal touch. These efforts are expected to support customer retention and satisfaction.
The company’s strong performance in the Medicare segment and ongoing improvements to its platform position it well for future growth. eHealth’s (NASDAQ:EHTH) commitment to innovation and customer service makes it an appealing stock for investors looking for opportunities in the health insurance brokerage sector.
According to Insider Monkey’s database, eHealth Inc. (NASDAQ:EHTH) has gained significant interest from institutional investors, with the number of hedge fund holders increasing to 19 in Q2 2024, up from 11 in the previous quarter.
6. Ryan Specialty Holdings Inc. (NYSE:RYAN)
Number of Hedge Fund Holders: 20
Ryan Specialty Holdings Inc. (NYSE:RYAN) is a leading provider of specialty insurance products and solutions for brokers, agents, and carriers. The company operates as a wholesale broker and managing underwriter to provide distribution, underwriting, product development, administration, and risk management services.
In the first quarter of 2024, the company updated its ACCELERATE 2025 restructuring program after identifying additional opportunities to enhance growth and productivity. The ACCELERATE 2025 will incur approximately $110 million in charges but is expected to generate annual savings of around $60 million by 2025.
For the second quarter of 2024, Ryan Specialty Holdings Inc. (NYSE:RYAN) reported total revenue of $695.4 million, an increase of 18.8% year-over-year. This growth was driven by a solid organic revenue increase of 14.2%. Additionally, net income rose by 40.8% to $118 million, reflecting the company’s strong performance.
On September 3, 2024, Ryan Specialty Holdings Inc. (NYSE:RYAN) announced that it had completed the acquisition of US Assure Insurance Services, effective August 30, 2024. This acquisition enhances the company’s capabilities in builder’s risk insurance and integrates US Assure’s advanced technology platform for improved underwriting efficiency.
Over the past 3 years, Ryan Specialty Holdings Inc. (NYSE:RYAN) has managed to grow its revenue at a compound annual growth rate of 20%. Additionally, analysts expect RYAN to grow its earnings by 31.20% this year.
According to Insider Monkey’s database, 20 hedge funds held stakes in Ryan Specialty Holdings Inc. (NYSE:RYAN) in the second quarter of 2024. This brings RYAN to the 6th spot on our list of the best insurance brokerage stocks to invest in.
5. Brown & Brown Inc. (NYSE:BRO)
Number of Hedge Fund Holders: 26
Brown & Brown Inc. (NYSE:BRO), one of the largest insurance brokerage firms in the US, ranks among the top 5 on our list of the best insurance brokerage stocks to buy. The company specializes in risk management services. Brown & Brown Inc. (NYSE:BRO) operates through three main segments: Retail, Programs, and Wholesale Brokerage, providing insurance solutions to a wide range of clients, including businesses, governmental institutions, and individuals.
In the third quarter of 2024, the company completed 10 acquisitions with estimated annual revenues of $13 million. This strategic growth through mergers and acquisitions highlights Brown & Brown Inc.’s (NYSE:BRO) commitment to expanding its market presence and building strong relationships within the industry. For Q3 2024, the company reported revenues of $1.2 billion, reflecting an increase of 11% compared to the same quarter last year. Commissions and fees rose by 10.1%, while organic revenue grew by 9.5%.
Brown & Brown Inc.’s (NYSE:BRO) Q3 2024 financial performance has been impressive, with income before taxes reaching $317 million, a significant increase of 31% from the previous year. Net income attributable to the company was $234 million, up 33%. Diluted net income per share increased by 30.6% to $0.81. For the first nine months of 2024, total revenues were $3.6 billion, a 12.1% increase compared to the same period in 2023.
Over the past five years, Brown & Brown Inc. (NYSE:BRO) has grown its top line at a compound annual growth rate (CAGR) of 14.84%, while its bottom line has increased at a CAGR of 20.84% during the same period. Over the past 5 years, the company has also grown its levered free cash flow at a CAGR of 19.50%.
Brown & Brown Inc.’s (NYSE:BRO) strong growth, successful acquisition strategy, and solid financial performance position it as an attractive investment opportunity in the insurance brokerage sector. According to Insider Monkey’s database, 26 hedge funds held stakes in BRO in the second quarter of 2024.
4. Arthur J. Gallagher & Co. (NYSE:AJG)
Number of Hedge Fund Holders: 42
Arthur J. Gallagher & Co. (NYSE:AJG) is an American insurance brokerage, risk management, and HR & benefits consulting company. It offers a comprehensive range of services, including customized property and casualty insurance, risk management programs, and consulting services in over 130 countries.
In the Q3 2024 earnings call, the company’s management highlighted a robust pipeline of over 100 potential mergers, representing approximately $1.5 billion in annualized revenue. Currently, around 60 of these opportunities are in advanced stages, which could contribute about $700 million in annualized revenue. With $1.2 billion in available cash by the end of the third quarter and strong expected free cash flow, Arthur J. Gallagher & Co. (NYSE:AJG) is well-positioned to fund its aggressive mergers and acquisitions strategy with an estimated capacity of around $3 billion for 2024.
Arthur J. Gallagher & Co. (NYSE:AJG) has reported impressive financial performance, with revenues increasing by 16% and organic growth at 8% for the first nine months of 2024. In Q3 alone, total revenues grew by 13% for the company’s combined brokerage and risk management segments. Net earnings increased by 12% in Q3.
The company is also actively investing to add niche experts, roll out new sales and support tools, and expand its data and analytics offerings.
Recently, on October 28, 2024, Arthur J. Gallagher & Co. (NYSE:AJG) announced the acquisition of Filos Agency, a retail property/casualty insurance agency based in Long Beach, New York. Additionally, on October 25, it acquired Via Financial Group in Australia and Redington Ltd. in the UK. These strategic acquisitions reflect Arthur J. Gallagher’s (NYSE:AJG) commitment to expanding its service capabilities and market presence.
Over the past 10 years, Arthur J. Gallagher & Co. (NYSE:AJG) has achieved a 9.72% compound annual growth rate (CAGR) in revenue and a 14.16% CAGR in net income.
As of the second quarter of 2024, AJG was held by 42 hedge funds, according to Insider Monkey’s database. Andvari Associates stated the following regarding Arthur J. Gallagher & Co. (NYSE:AJG) in its Q2 2024 investor letter:
“Founded in 1927 by Arthur J. Gallagher & Co. (NYSE:AJG), the eponymous firm is now the third largest retail property and casualty insurance broker in the United States and also the third largest reinsurance brokerage firm in the world. In addition to their brokerage businesses, Gallagher is a significant player in third-party claims administration and HR & benefits consulting.
As hinted in the above table, Gallagher is an acquisitive company. It has been a major consolidator of the highly fragmented market of insurance brokers for decades. In just the past five full years, Gallagher has acquired 195 businesses. And the market still remains fragmented. The company estimates there are tens of thousands of independent firms across the English-speaking countries of the world.
Given Gallagher’s ability to grow organically, grow through acquisition, and the essential services it provides, there have only been three times in the past twenty-five years when revenues declined: down 0.56% in 2005, down 0.31% in 2008, and down 1.63% in 2020. Which is to say, revenues barely budged despite those tumultuous years. This is a resilient company.”
3. Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Number of Hedge Fund Holders: 47
Willis Towers Watson Public Limited Company (NASDAQ:WTW) is a British-American multinational firm that specializes in commercial insurance brokerage and strategic risk management services. The company operates in 140 countries, providing data-driven solutions in the areas of people, risk, and capital to help clients enhance their strategies and maximize performance.
On October 28, WTW secured an insurance license to operate as a broker in Saudi Arabia, expanding its global footprint. Additionally, on October 29, 2024, Willis Towers Watson Public Limited Company (NASDAQ:WTW) launched a new insurance brokerage service in Japan, further strengthening its Corporate Risk & Broking business.
In the second quarter of 2024, the company reported a revenue increase of 5%, reaching $2.3 billion, with organic growth of 6%. Willis Towers Watson Public Limited Company’s (NASDAQ:WTW) diluted earnings per share rose significantly by 55% to $1.36, while adjusted diluted EPS increased by 24% to $2.55. The Risk & Broking segment performed well, generating $979 million in revenue for the quarter, a 9% increase from the previous year. This growth was driven by strong client retention and new business activity across all regions.
Analysts expect Willis Towers Watson Public Limited Company (NASDAQ:WTW) to grow its earnings by 13.40% in the current year. Additionally, analysts have set a 12-month median price target of $320.00 for WTW stock, suggesting a potential upside of 9% from its current price.
The company’s strategic focus on expanding its services and entering new markets positions it well for future growth. As of the second quarter of 2024,Willis Towers Watson Public Limited Company (NASDAQ:WTW) was held by 47 hedge funds, according to Insider Monkey’s database. WTW ranks among the top 3 on our list of the best insurance brokerage stocks to invest in.
2. Marsh & McLennan Companies Inc. (NYSE:MMC)
Number of Hedge Fund Holders: 51
Marsh & McLennan Companies Inc. (NYSE:MMC) is a leading global professional services firm that specializes in insurance brokerage, risk management, and consulting. The company operates through four main divisions: Marsh, Guy Carpenter, Mercer, and Oliver Wyman, providing comprehensive solutions to clients in 130 countries.
Recently, on September 30, Marsh & McLennan Companies Inc. (NYSE:MMC) announced its agreement to acquire McGriff Insurance Services for $7.75 billion. McGriff Insurance Services is a leading provider of insurance broking and risk management services. This acquisition will enhance the company’s capabilities in commercial property and casualty insurance, employee benefits, and management liability.
The company is on track for a record year in mergers and acquisitions, having committed nearly $10 billion to acquisitions so far in 2024. These acquisitions include McGriff Insurance Services, Vanguard’s U.S. OCIO business, Cardano, Horton, and FBBI. These strategic moves highlight Marsh & McLennan’s (NYSE:MMC) strategy to invest in faster-growing areas of its business and expand its market presence to meet the evolving needs of its clients.
In the third quarter of 2024, Marsh & McLennan Companies Inc. (NYSE:MMC) reported a 6% increase in GAAP revenue and a 5% rise in underlying revenue. The company’s earnings per share also showed positive growth, with GAAP EPS rising 3% to $1.51 and adjusted EPS increasing 4% to $1.63. These results reflect the firm’s strong performance across its business segments and its effective execution of its growth strategy.
Over the past five years, the company has seen its revenue grow at a compound annual growth rate (CAGR) of 8.26%, with net income increasing at a CAGR of 21.78%. With a solid track record of growth, Marsh & McLennan Companies Inc. (NYSE:MMC) stands out as an attractive investment opportunity in the insurance brokerage sector.
MMC is one of the best insurance brokerage stocks to buy now. According to Insider Monkey’s Q2 2024 database of over 900 hedge funds, 51 hedge funds held stakes in Marsh & McLennan Companies Inc. (NYSE:MMC).
1. Aon plc (NYSE:AON)
Number of Hedge Fund Holders: 54
Aon plc (NYSE:AON) is an insurance broker and risk management firm that operates in over 120 countries. The company provides a wide range of services, including Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions, and Data & Analytic Services. Aon plc’s (NYSE:AON) expertise in risk capital and human capital allows it to deliver valuable insights that help clients make informed decisions to protect and grow their businesses.
In April 2024, the company completed the acquisition of NFP for an enterprise value of $13 billion. This strategic move enhances Aon plc’s (NYSE:AON) presence in the growing middle-market segment, adding over 7,700 colleagues and expanding its capabilities in property and casualty brokerage, benefits consulting, wealth management, and retirement planning. Additionally, Aon plc (NYSE:AON) made six middle-market acquisitions in Q3 2024, demonstrating its commitment to capitalizing on opportunities in this fast-growing sector.
Aon plc (NYSE:AON) reported total revenues of $3.7 billion for Q3 2024, including a 7% organic revenue growth.
The company is implementing its 3×3 Plan, which focuses on delivering integrated risk capital and human capital solutions through the Aon Client Leadership Model supported by its Aon Business Services platform. The company is also actively investing in advanced analytics and AI-driven services to position itself well for future growth.
Over the past 5 years, Aon plc (NYSE:AON) has grown its revenue at a compound annual growth rate (CAGR) of 6.49%, while its net income has increased at a CAGR of 10.14% during the same period.
With its robust growth strategy and recent acquisitions, Aon plc (NYSE:AON) stands out as a compelling investment opportunity in the insurance brokerage sector.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 54 hedge funds held stakes in AON. Weitz Investment Management stated the following regarding Aon plc (NYSE:AON) in its “Partners III Opportunity Fund” second-quarter 2024 investor letter:
“The second quarter saw an elevated level of portfolio activity, including three new holdings. We re-initiated a position in global insurance broker and benefits provider Aon plc (NYSE:AON), as dissatisfaction over a recent, highly valued acquisition and the announced retirement of its well-regarded CFO pressured shares. Despite these near-term headwinds, we remain confident in Aon’s ongoing leadership team and demonstrated track record of execution.”
While we acknowledge the potential of insurance brokerage companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AIG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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