Insurance brokers Brown & Brown (BRO) and Arthur J. Gallagher & Co. (AJG) are expected to continue seeing organic growth, and conditions for these brokers seem to be improving and their strategies are riding on the domestic macro improvement, says Brett Huff, Research Analyst at Stephens Inc.
“Right now we like Brown & Brown the best, simply because we think that Brown & Brown has the most upside to gain from exposure units getting better. It tends to sell to the middle market of the United States. The middle market businesses generally have not led us out of this recession as they usually do, so we think they probably have the most organic growth and incremental margin upside yet to go,” Huff said.
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AJG doesn’t stay far behind, and this broker has implementing more efficient cost-management strategies and the growth and profitability prospects look promising for this company, Huff said..
“We also really like Gallagher, simply because they’ve been the best operators of the insurance broker group over the last couple of years with the earliest and best and most consistent organic growth. We think that’s a function of just their tight expense controls, and I think their sales execution has just been very good. We like them because we think they have a good amount of capital to deploy, and we think that the market in general is underestimating the amount of capital that they’ll deploy to buy additional growth and additional profitability,” Huff said.
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