We recently compiled a list of the 7 Best Insurance Brokerage Stocks to Invest in Now. In this article, we are going to take a look at where Brown & Brown Inc. (NYSE:BRO) stands against the other insurance brokerage stocks.
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.
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).
A portrait of a professional insurance broker at their desk, reviewing a policy.
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.
Overall BRO ranks 5th on our list of the best insurance brokerage stocks to invest in now. While we acknowledge the potential of BRO as an investment, 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 BRO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.