Cochran, Caronia & Co. Study Shows Mid-Sized Insurance Brokerages a Better Investment than Large Players; Legacy liabilities will limit financial flexibility and serve as expense drag to big brokers.CHICAGO -- The nation's largest insurance brokerages are likely to lose investment value and market share to middle-market firms in the near future, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a recently completed study by Cochran, Caronia & Co. Adam Klauber (Managing Director of Equity Research), who conducted the study, said that rapid growth through acquisition over the past decade has left large brokerages like Aon and Marsh with legacy expenses such as pension liabilities Pension liabilities Future liabilities resulting from pension commitments made by a corporation. Accounting for pension liabilities varies widely by country. , debt and goodwill. As a result, the big players will have less financial flexibility and greater expense drag than their smaller competitors. The situation is further complicated by the softening rate environment in the insurance industry and the elimination of contingent commissions Contingent commissions is a term used in the American insurance industry for any kind of broker's commission which is contingent upon some event occurring (instead of a commission paid on the sale itself). In the UK this form of payment is known as Overriders. by large brokers in response to recent investigations by New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Attorney General Elliott Spitzer. "Instead of growth through acquisition, the large brokers will have to focus on execution to be successful," said Klauber. Mid-market firms like Brown & Brown, Hub International Hub International Limited is an insurance brokerage based in Chicago, Illinois. The company has 200+ offices across the United States and Canada. The company offers three types of commercial products and services: property and casualty products, employee benefits and risk and Hilb, Rogal & Hobbs will fare better. "Because they are smaller, these firms can continue to achieve incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. growth through acquisitions," Klauber noted. "They also have less debt and greater financial flexibility. In addition, unlike the larger firms, the mid-market firms are continuing to generate revenue through contingent commissions, and can use these funds to grow their business." The net effect, notes Klauber, is that the competitive shifts between large and mid-sized brokers will become more pronounced. "Our analysis suggests that the valuations of mega-brokers and the mid-market brokers will diverge diverge - If a series of approximations to some value get progressively further from it then the series is said to diverge. The reduction of some term under some evaluation strategy diverges if it does not reach a normal form after a finite number of reductions. going forward," he said. "I believe that mid-market brokers with a greater potential to grow will be a better investment over time." A copy of the report can be obtained by registering at the research section of www.cochran-caronia.com. About Cochran, Caronia & Co. Cochran, Caronia & Co. is a full-service, independent investment banking firm specializing in the property-casualty, life and health industries and related businesses. It offers clients research, equity sales and trading, alternative capital-raising and mergers and acquisitions advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal . Headquartered in Chicago, with offices in New York, Cochran, Caronia & Co. is consistently ranked among the leaders in insurance investment banking transactions. For further information about Cochran, Caronia & Co., visit it's website at www.cochran-caronia.com |
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