Slow organic growth, soft market hit public brokers: Consultant

Publicly traded insurance broker valuations have fallen to their lowest levels in a decade as slowing organic growth and softening commercial property/casualty pricing pressure the sector, according to a report by Reagan Consulting released Wednesday.

Brokers are trading at about 12 times to 13 times EBITDA following first-quarter earnings releases, while average organic revenue growth among public retail brokers was 3.2%, trailing privately held brokers, the Atlanta-based M&A consultant said.

Public broker stocks were down between 10% and 45% as of May 8, while the S&P 500 was up 8% year-to-date, the report said.

Public brokers are more exposed to large and jumbo accounts, where pricing has softened more significantly than in the middle market, the report said.

On Feb. 9, public broker stocks fell nearly 10% after ChatGPT, Insurify and other platforms announced apps that allow users to shop for insurance through AI-based chats, despite their focus on small-account auto insurance, the report said.

Commercial property/casualty rate indices compiled by Marsh and the Council of Insurance Agents & Brokers are at or below zero after a sustained hard market, the report said.

Consensus analyst price targets are 34% above current trading values, which could point to improving conditions for publicly traded brokers, Reagan said.