Overall, Q3 2023 earnings results from insurance brokers reflected favorable outcomes across the board. Management teams expressed confidence in meeting targets for Q4 2023 and 2024.
Quick look: Organic growth rates
Organic growth figures reported in Q3 2023 were generally comparable to those seen in Q2 2023. Most brokers reported organic growth rates in a range of 6%-19%.
- Marsh & McLennan Companies, Inc. (MMC) reported Q3 2023 organic growth of 10%, compared to 11% in Q2 2023 and 9% in Q1 2023.
- Brown & Brown, Inc. (BRO) posted organic growth of 9.6% in Q3 2023, below its 11.2% in Q2 2023.
- Arthur J. Gallagher & Co. (AJG): For AJG’s combined brokerage and risk management segments, AJG posted 10.5% organic growth in Q3 2023, close to the firm’s Q2 2023 organic growth of 10.8%.
- Willis Towers Watson Public Limited Company(WTW) posted 9% organic growth in Q3 2023, above the 7% in Q2 2023.
- AON plc. (AON) hadorganic revenue growth of 6% in Q3 2023, compared to 6% in Q2 2023.
- BRP Group, Inc.’s (BRP) organic growth in Q3 2023 was 19%, compared to Q2 2023’s 22%.
- Ryan Specialty Holdings, Inc. (RYAN) reported Q3 2023 organic growth of 14.7%, compared to 16.1% in Q2 2023.
Marsh & McLennan Companies, Inc. (NYSE: MMC)
MMC reported Q3 2023 adjusted earnings per share (EPS) of $1.57 on revenue of $5.38 billion, compared to consensus estimates of $1.39 adjusted EPS on $5.22 billion revenue. Marsh’s Q3 2023 organic growth was 10%, compared to 11% in Q2 2023 and 9% in Q1 2023.
John Doyle, President and CEO, said: “Marsh McLennan’s third quarter results were outstanding, reflecting strength across the business. We had another quarter of double-digit underlying revenue growth, strong adjusted EPS growth and margin expansion.” Doyle spoke of the macroeconomic outlook remaining “uncertain,” with capital market volatility and challenging geopolitical situation. However, he believes that MMC is well positioned to perform across economic cycles.
Primary insurance rates increased, with the Marsh Global Insurance Index increasing 3% overall, in line with Q2 2023. Property rates rose 7%, compared to 10% in Q2 2023, while casualty pricing increased in the low single-digits. Cyber insurance rates decreased modestly, and financial and professional liability rates were down mid-single digits.
Brown & Brown (NYSE: BRO)
BRO reported Q3 2023 adjusted EPS of $0.71 on revenue of $1.07 billion, compared to consensus EPS of $0.62 on $1.07 billion revenue. Organic growth was 9.6% in Q3 2023, below its 11.2% in Q2 2023, driven by new business. The firm saw the economy remaining resilient, with growth and inflation returning to more normal levels.
The company saw rate increases for most lines staying consistent with the first half of the year, with admitted markets up 5%-10% and excess and surplus lines up 10%-25%. However, workers compensation rates and professional liability rates continued to decline. E&S property remained “very challenging” due to ongoing drivers, including losses and increased insured values. Personal lines in California, Texas, and Florida continued to be difficult due to multiple factors, including a reduction in providers, higher costs of homeowners insurance, driving business into E&S.
CEO, President, and Director J. Powell Brown noted that “Regarding the M&A market for the quarter, the level of deals primarily from financial backers continue to slow, and we generally saw fewer bidders for businesses.” He also noted that while valuations softened slightly, good businesses still trade at premium multiples. BRO acquired seven companies in Q3 2023, with annual revenue of $14 million. BRO has completed 20 total acquisitions year-to-date.
Arthur J. Gallagher & Co. (NYSE: AJG)
AJG reported Q3 2023 adjusted EPS of $2.00 on $2.45 billion, compared to consensus $1.95 on $2.44 billion revenue. For their combined brokerage and risk management segments, AJG posted 10.5% organic growth, close to the firm’s Q2 2023 organic growth of 10.8%. Adjusted EBITDAC (Earnings Before Interest, Taxes, Depreciation, Amortization, and COVID) for these segments was 30.8%, up 78 basis points.
For the brokerage segment, organic growth was 9.3% and adjusted EBITDAC growth was 23%, with an expansion of about 55 basis points. During Q3 2023, AJG completed 12 mergers totaling $57 million of estimated annualized revenue.
AJG had an active Q3 with 12 new tuck-in acquisitions representing $57 million of estimated annualized revenue. AJG also signed agreements to acquire the insurance brokerage operations of two banks – Eastern Bank and Cadence Bank – with total pro forma annualized revenue near $275 million.
Looking to the future, Chairman, President & CEO J. Patrick Gallagher noted, “We still expect to grow over these [new business] wins by double digits during the fourth quarter due to our superior client offerings, some smaller new business wins in ’23 and continued growth in claim activity.”
Willis Towers Watson Public Limited Company (NASDAQ: WTW)
WTW reported Q3 2023 adjusted diluted EPS of $2.24 on revenue of $2.17 billion, compared to consensus estimates of $2.07 adjusted diluted EPS. WTW posted 9% organic growth in Q3 2023, above the 7% in Q2 2023. The company noted that its growth was driven by its global model and investments in technology and talent. Its focus on specialization in its Risk & Broking segment has also been a driver of its strong organic growth.
WTW noted that its specialty lines continue to see faster growth compared to its average Risk & Broking growth. “We’ve generated substantial momentum by developing innovative products and services, engaging in strategic partnerships, and building platforms like MGAs, MGUs and affinity products,” said WTW CEO & Director Carl A. Hess.
The company recently announced the launch of Verita, a new MGU focused on select industry verticals, like real estate and leisure, which will drive WTW’s specialization strategy in Risk & Broking.
WTW maintained its prior 2023 full-year guidance for mid-single-digit organic revenue growth and adjusted operating margin expansion. The company projects $160 million of incremental run-rate savings from the Transformation program in 2023.
AON plc. (NYSE: AON)
AON reported adjusted EPS of $2.32 on $2.95 billion revenue, compared to consensus estimates of $2.21 adjusted EPS on $2.88 billion revenue. Organic revenue growth was 6% in Q3 2023, compared to 6% in Q2 2023. The firm noted that its Aon United strategy and Aon Business Services platform helped drive its performance.
Aon announced the acceleration of its Aon United strategy across Aon Business Services, Risk Capital and Human Capital, and the Aon Client Leadership Model. There will be a related cash restructuring charge of approximately $900 million, with a projected ~$350 million of annual run rate savings by year-end 2026. This will include standardized operations, integrating operating platforms, and driving product innovation, as well as workforce planning.
AON continues to expect mid-single-digit or greater organic revenue growth for Q4 2023 and beyond.
BRP Group, Inc. (NASDAQ: BRP)
BRP reported adjusted EPS of $0.29 on revenue of $306.3 million, compared to consensus estimates of $0.28 adjusted EPS on $303.2 million revenue. BRP’s organic growth in Q3 2023 was 19%, slightly lower than Q2 2023’s organic revenue growth of 22%. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew 53% to $64 million resulting in an adjusted EBITDA margin of 21% for Q3 2023. For their insurance advisory solutions, BRP generated organic growth of 11% in Q3 2023.
For Q4 2023, the company expects revenue of $275-$285 million, organic growth of 12%-14% and adjusted EBITDA between $40-$45 million. BRP does not expect any meaningful mergers & acquisitions (M&A) activity in 2024.
Trevor Baldwin, CEO of BRP Group, shared, “As this quarter’s results once again proved out, BRP remains a diversified well-balanced business that is built to perform and deliver industry-leading growth through the various economics and industry rate cycles.”
Ryan Specialty Holdings, Inc. (NYSE: RYAN)
RYAN reported Q3 2023 adjusted EPS of $0.32 on revenue of $501.9 million, compared to consensus estimates of $0.31 adjusted EPS on $496.4 million. RYAN reported Q3 2023 organic growth of 14.7%, compared to 16.1% in Q2 2023. The growth was driven by strength across its lines of business, and strong contributions from its recent acquisitions.
Ryan continued to be confident in the strength of the E&S space. Chairman & CEO Patrick G. Ryan said on the Q3 2023 earnings call: “The E&S marketplace remained robust, providing solutions that are otherwise simply not available or hard-to-place risks. We expect this trend to support our growth and continue for the foreseeable future.”
President & Director Timothy William Turner spoke about the state of the hard market: “Through Q3, we remained in a prolonged stage of historically hard market conditions. Pricing in the E&S market largely held firm or accelerated in many lines of business with property continuing to see the strongest rate momentum, though in a seasonally smaller quarter, exceptions remain in public company D&O and Cyber.” However, RYAN continues to see the flow of business into the non-admitted market as a greater driver of RYAN’s growth more so than rate.
Investment banking services in the USA offered through MarshBerry Capital, LLC, Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, LLC, 28601 Chagrin Blvd, Suite 400, Woodmere, OH 44122 (440) 354-3230