This report does not constitute a rating action
Insurance Brokers And
Servicers Sector View 2024:
Poised For Growth
Julie Herman
Director, Insurance Ratings
Joe Marinucci
Director, Insurance Ratings
Jan. 31, 2024
Key Takeaways
2
• We are maintaining our stable sector view for global insurance services, reflecting generally
resilient industry fundamentals across the subsectors.
• Current ratings and outlooks incorporate our expectation for real GDP growth dipping below
trend, core inflation inching down throughout the year, and modest federal funds rate cuts
beginning mid-year.
• Insurance brokers remain well positioned with continued, though slightly moderating, market
tailwinds from insurance pricing and still above-trend inflation.
• Non-brokers will continue to demonstrate mixed performance but should largely withstand
market headwinds, supported by generally steady retention, continued product and market
expansion, and effective expense management.
• We expect credit metrics will generally remain within rating tolerances, but often with thin
cushions, because most issuers have not tempered financial leverage despite the higher cost
of capital.
3
• Sector provides business services to the insurance industry with limited or no exposure to underlying insurance risk.
• 36 credits rated under corporate methodology; a subset of corporate business and consumer services.
• Majority in the ‘B’ rating category due to weak credit metrics and sponsor ownership.
Rating
distribution
Ownership
distribution
Subsector
distribution
Geography
distribution
Outlook
distribution
Insurance Services Portfolio Snapshot
67%
14%
8%
11%
Brokers
Healthcare Servicers
Claims Administrators
Warranty Administrators
83%
3%
14%
United States
Canada
Europe
As of Jan. 30, 2024. Source: S&P Global Ratings
2
1 1 1
3
4
17
6
1
0
2
4
6
8
10
12
14
16
18
92%
6%
3%
Stable
Negative
CW Positive
61%
14%
25%
Financial Sponsor
Other
Publicly Traded
• Rating activity in the sector is generally modest relative to many other corporate sectors, partly because underlying insurance
purchases tend to be more stable (and often compulsory) versus other more discretionary products and services.
• Downgrade skew in 2023 is mostly issuer specific and doesn’t reflect industry strain.
Limited Rating Volatility Over Last Five Years
Insurance services rating actions (2019-2023)
-20
-15
-10
-5
0
5
10
15
20
2019 2020 2021 2022 2023
Upward outlook revision/CreditWatch positive Upgrade Downward outlook revision/CreditWatch negative Downgrade
4
Source: S&P Global Ratings
Insurance Services 2023 And Year-To-Date 2024 Rating Activity
2023
5
Company Subsector To From Rationale
Sedgwick L.P. Claims administrator B+/Stable B/Positive Sustained business position improvements as the largest global TPA by a sizable margin
Willis Towers Watson PLC Broker BBB+/Stable BBB/Positive Sustained leverage improvement on more conservative financial policy and stabilized performance
NFP Holdings LLC Broker B/Watch Pos B/Stable Expected credit profile improvements in conjunction with acquisition by higher-rated Aon
Zelis Holdings L.P. Health Servicer B/Positive B/Stable Improving credit metrics on robust underlying growth and more conservative financial policy
Aon PLC Broker A-/Negative A-/Stable Expected credit measure deterioration in conjunction with acquisition of NFP
BRP Group Inc. Broker B-/Stable B/Negative Elevated leverage on debt-funded M&A and costs related to growth initiatives
MedRisk Health Servicer B-/Stable B/Negative Slower deleveraging trajectory than anticipated on sluggish earnings growth
MultiPlan Corp. Health Servicer B/Stable B+/Stable Weakened credit metrics on lower utilization and contract renewal rates
One Call Corp. Health Servicer CCC+/Stable B-/Negative Unsustainable capital structure driven by performance misses on client insourcing and elevated costs
Saga PLC Broker B-/Negative B/Stable Tight liquidity in light of underperformance in motor brokerage and upcoming debt maturities
YTD 2024
Zelis Holdings L.P. Health Servicer B+/Stable B/Positive Material deleveraging on robust underlying growth trends and more conservative financial policy
Source: S&P Global Ratings
6
U.S.
• S&P Global Ratings now expects U.S.
economic expansion to decelerate to
1.5% in 2024 on an annual average
basis and 1.4% in 2025.
• Businesses are facing higher costs of
capital, which will lower capital
expenditures and hiring. The
unemployment rate will likely rise in
the next two years--to 4.6% in 2025
from 3.7% in 2023--slightly above the
longer-run steady state.
• As normalization in the product and
labor markets continues, disinflation
will endure, albeit unevenly.
• We think that the Federal Reserve will
pivot to rate cuts starting sometime in
mid-2024.
S&P Global Ratings: Economic Outlook
Source: S&P Global Ratings Economics.
Key indicators 2021 2022 2023F 2024F 2025F
Real GDP (annual avg % change) 5.8 1.9 2.4 1.5 1.4
Core CPI (annual avg % change) 3.6 6.2 4.8 2.8 2.3
Unemployment rate (%) 5.4 3.6 3.7 4.3 4.6
Payroll employment (mil.) 146.3 152.6 156.2 156.9 156.4
Federal funds rate (%) 0.1 1.7 5.1 5.3 3.2
Global
World GDP growth forecasts
(annual % change)
6.4 3.6 3.3 2.8 3.2
7
Brokers
8
Brokers – Peer Comparison
Business risk profile (BRP)
Financial risk profile (FRP)
Minimal Modest Intermediate Significant Aggressive Highly Leveraged
Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+
Strong
aa/aa- a+/a
a-/bbb+
Aon PLC (A-/Negative)
Marsh & McLennan Cos. (A-/Stable)
Willis Towers Watson PLC (BBB+/Stable)
bbb bb+ bb
Satisfactory a/a- bbb+
bbb/bbb-
Arthur J. Gallagher & Co. (BBB/Stable)
Brown & Brown Inc. (BBB-/Stable)
bbb-/bb+ bb b+
Fair bbb/bbb- bbb- bb+ bb
bb-
Ryan Specialty Group, LLC (BB-/Stable)
b
AmWINS Group Inc. (B+/Stable)
NFP Holdings LLC (B/Watch Pos)
Acrisure Holdings Inc. (B/Stable)
Alliant Holdings L.P. (B/Stable)
AssuredPartners Inc. (B/Stable)
Broadstreet Partners Inc. (B/Stable)
Diot-Siaci TopCo (B/Stable)
Howden Group Holdings Ltd. (B/Stable)
HUB International Ltd. (B/Stable)
Kereis SAS (B/Stable)
USI Inc. (B/Stable)
Weak bb+ bb+ bb bb- b+
b/b-
Cross Financial Corp. (B/Stable)
IMA Financial Group Inc. (B/Stable)
OneDigital Borrower LLC (B/Stable)
Amynta Holdings LLC (B-/Stable)
BRP Group Inc. (B-/Stable)
Navacord Corp. (B-/Stable)
Saga PLC (B-/Negative)
Vulnerable bb- bb- bb-/b+ b+ b b-
As of Jan. 30, 2024. Source: S&P Global Ratings
9
Brokers – At A Glance
The brokerage industry is:
Business risk profile characteristics
• Our business risk profile scores range from strong/satisfactory for market
leaders with a large account, global focus, and/or above-average profitability, to
fair/weak for the rest of the portfolio generally focusing on the competitive small-
to mid-market segments.
• Common strengths include performance stability through cycles given
largely nondiscretionary products, generally robust margins (typically 25%-35%),
and limited client/revenue concentrations.
• Common weaknesses include narrow product focus, limited market share,
and intense competition/limited differentiation in a crowded space.
Source: S&P Global Ratings
Financial risk profile characteristics
• Our financial risk profile scores are intermediate/aggressive for publicly
traded players, with moderate leverage fueled by high shareholder distributions
and debt-funded M&A.
• Our financial risk profile scores for all the private-equity-owned players are
highly leveraged, with weak credit protection measures for this group driven by
frequent flips and dividend recaps, as well as debt-driven M&A.
• The sector generally enjoys good free cash conversion and limited capex, with
a favorable maturity profile and limited financial covenants.
Bifurcated
• Marsh & McLennan, Aon, and Willis Towers Watson dominate the large
account space and the reinsurance broking universe (along with Arthur J.
Gallagher, which purchased Willis Re in late 2021). The rest of the industry
primarily services the vast middle-market and small account space.
Consolidating
• U.S. insurance agencies completed over 700 deals in 2023.
Highly fragmented
• Despite robust M&A activity in the space for well over the last decade,
there are still thousands of independent insurance agencies operating in
the U.S. No player in the middle-market space has significant market
share.
Private-equity-heavy
• Private equity presence has continued to intensify since entering the
sector over 15 years ago, attracted to the sector’s strong free cash flow.
Shifting to value
• The industry is increasingly moving from a relationship-driven model to an
analytics-driven model based on value-added services and specialized
expertise.
Rating distribution Outlook distribution
10
Our sector view on insurance brokers is stable, as naturally sticky revenue streams, continued favorable pricing, and net benefits from still above-trend
inflation mitigate expected below-trend economic growth.
Key expectations:
• Organic growth rates to remain robust in the mid-single digits or better on overall favorable market impact and steady new business and retention.
• Margins to hold steady or slightly improve on efficiency initiatives and operating leverage.
• M&A will remain robust despite higher funding costs and elevated valuations amid a continued fragmented space and strong buyer demand.
• Liquidity to stay healthy on strong free cash flow fundamentals and favorable debt maturity profiles.
• Credit metrics will remain steady as financial policies and leverage targets stay largely unchanged despite higher debt service.
Brokers – Credit Overview
8% 4% 4% 4% 4% 4% 54% 17%
A- BBB+ BBB BBB- BB- B+ B B-
As of Jan 30, 2024. Source: S&P Global Ratings.
88%
8%
4%
Stable
Negative
CW Positive
Source: Direct premiums written (DPW) from S&P Global Market Intelligence.
Nominal GDP forecast from S&P Global Ratings Economics.
Organic growth from company data and S&P Global Ratings. Commercial lines pricing from CIAB Pricing Survey
4%
5%
4%
-2%
10%
9%
5%
4%
5%
5%
5%
2%
9%
10%
10%
9%
4%
5%
5%
3%
9%
8%
8%
7%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2017 2018 2019 2020 2021 2022 2023 2024f
U.S. Nominal GDP Growth U.S. P&C DPW Growth Median Organic Growth for Rated Brokers
Organic Growth Bolstered By Rising Insurance Premiums
U.S. P/C commercial lines pricing (standard business)
Growth in broker organic revenue relative to U.S. P/C DPW and U.S. nominal GDP
• Elevated premiums gains in recent years -- fueled by high
insurance price increases combined with inflation-driven
exposure unit growth -- have led to above-trend growth for
brokers.
• We expect premium growth to remain high in 2024, just
below 2023 levels, setting the stage for a continued
market tailwind for brokers.
• While rate trends vary widely by line, carriers will continue
to push for price increases in response to rising loss costs
and insured values from social and economic inflation and
more severe and frequent weather events.
• Modestly lower nominal GDP from moderating inflation
and slower real GDP growth will temper the insured
exposure side of the premium equation.
• Brokers with material wholesale, managing general agent,
or other specialty operations should continue to
outperform as premium growth in the excess and surplus
markets far exceeds standard lines.
• Company-specific trends will vary on strategic execution,
business mix, retention, and new business.
11
-5%
0%
5%
10%
15%
20%
25%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2021 2022 2023
Average Commercial Property General Liability
Umbrella Commercial Auto Workers Compensation
• Margins have slightly moderated recently given wage inflation, an increase in travel and expense spending post-pandemic, and
investment in internal growth initiatives. Company-specific margins vary widely, but most remain 25%-35%.
• We expect stable to slightly positive margins in 2024 and beyond due to operating leverage and benefits from efficiency initiatives,
mitigated by gradual declines in fiduciary income and continued restructuring costs.
• AI initiatives in the sector are still in early stages, with many issuers engaged in pilot programs focused on efficiency gains, and a
handful also focused on front-end lead generation and sales tools.
Broker Margins Stabilize Above Pre-Pandemic Levels
Profitability of rated brokers
12
26.9%
28.9%
30.9%
32.3%
31.1%
29.4%
30.2%
24%
26%
28%
30%
32%
34%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2018 2019 2020 2021 2022 2023f 2024f
EBITDA margin
Mil. $
Median EBITDA Median Revenue Median EBITDA Margin
Company data, S&P Global Ratings.
Revenue growth composition for rated brokers
• Deal activity remained high in 2023, though down from 2022 on account of higher
interest rates, economic uncertainty, and continued valuation creep.
• Deal volume should remain robust due to enduring supply and demand characteristics:
– Persistent demand driven by a crowded buyers club (largely private equity-backed
and public companies), many of which are making more focused bets, though they
largely remain in the game.
– Abundant supply remains, with the industry still highly fragmented as acquired
targets are replenished quickly by scaling entrants.
• Majority of acquired companies are “tuck-ins” that further enhance the buyer’s core
competency, with an increasing focus on international and specialty-type operations.
13
Broker M&A Is A Mainstay
U.S. insurance agency M&A activity
Top 10 and top 100 broker revenue trends
Source: U.S. insurance agency M&A activity data from Marshberry Q4 2023 M&A Market Report.
Top 10 & Top 100 Broker Revenue Trends data from Business Insurance ranking reports (100 largest brokers of U.S. business). Revenue growth composition data from company data, S&P Global Ratings.
5%
3%
9%
8%
8%
7%
13%
10%
11%
11%
8%
8%
0%
5%
10%
15%
20%
2019 2020 2021 2022 2023f 2024f
Organic Revenue Growth Inorganic Revenue Growth
324
445
535
515
673
734
690
798
1066
903
751
7.4x
7.9x
8.7x
8.5x
8.8x
9.3x
9.8x
10.5x
11.9x
11.7x
12.4x
0x
2x
4x
6x
8x
10x
12x
14x
0
200
400
600
800
1,000
1,200
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Deal Count Purchase Price Multiple (Base price & realistic earnout)
74%
71%
70%
65%
60%
65%
70%
75%
0
20
40
60
80
2013 2016 2019 2022
Total U.S. Revenue of Top 10 Brokers
Total U.S. Revenue of Top 100 Brokers
Top 10 as % of Top 100
Cash flows for rated brokers
• Cash conversion consistently high supported by low capex and
working capital requirements.
• No material maturities across speculative-grade portfolio until
2027, and a well-laddered maturity profile across investment-
grade portfolio.
• With more favorable credit market conditions, capital markets
activity has picked back up since 2022, primarily on
opportunistic M&A and refinancing activity.
14
Broker Liquidity Supported By Favorable Cash Flow And Maturity Profile
Debt issuance activity for rated brokers
Upcoming debt maturities for rated
speculative-grade brokers**
* FCF Conversion defined as (Adj. EBITDA – CapEx) / Adj. EBITDA, **Excluding revolving credit facilities. Source: Company data, S&P Global Ratings
41
38
18
36
0
10
20
30
40
50
0
5
10
15
20
25
30
2020 2021 2022 2023
Bil. $
Value No. of Issuances
0
2
2
25
9
9
10
1
0
10
20
30
0
5
10
15
20
25
2024 2025 2026 2027 2028 2029 2030 2050
Bil $
Value No. of Maturites
IG WAM
of ~10
years
93%
95%
96%
94%
95%
95%
75%
80%
85%
90%
95%
100%
0
300
600
2019 2020 2021 2022 2023f 2024f
Median Cash Flow from Operations Median FCF Conversion*
Leverage for rated brokers
Leverage remained steady in 2023 and we expect that trend to
continue in 2024.
• Although their business model leads to natural deleveraging,
brokers tend to offset any credit improvements from
performance gains through frequent debt-funded M&A and
shareholder initiatives.
• While some issuers have gravitated toward the more
conservative end of their leverage targets given higher cost of
capital, most have not.
Coverage metrics, which have fallen for many issuers on higher
cost of capital, should remain largely stable in 2024.
• Investment-grade issuers have benefited from largely fixed-
rate debt.
• Many speculative-grade issuers have limited buffer remaining
within our ratings after year-on-year declines, but we think the
portfolio’s coverage metrics have past the trough.
15
Key Credit Metrics Expected To Be Stable
Coverage for rated brokers
2.9x
2.5x
2.2x
2.4x 2.4x 2.4x
6.8x
6.7x
7.6x
6.8x
7.1x
6.9x
0x
2x
4x
6x
8x
10x
2019 2020 2021 2022 2023f 2024f
Investment Grade
Median Debt-to-EBITDA
Speculative Grade
Median Debt-to-EBITDA
8.5x
8.9x
10.9x
9.5x
9.8x
9.3x
2.5x
2.6x
3.0x
2.4x
1.9x
2.0x
0x
5x
10x
15x
2019 2020 2021 2022 2023f 2024f
Investment Grade
Median EBITDA Int. Coverage
Speculative Grade
Median EBITDA Int. Coverage
Source: Company data, S&P Global Ratings.
Total revenue/growth
Aon (AON) : Through its pending acquisition of NFP, Aon is making a scaled
entry into the vast middle market. Because this is a high-growth segment
where Aon was largely absent, we view this transaction as strategically sound
and opportunistic. Aon’s margins, which are higher than most peers, will
come down modestly with the acquisition.
Arthur J. Gallagher (AJG): Bolstered by strong organic and acquisitive growth
and the addition of reinsurance, AJG has surpassed WTW in size to become
the third-largest broker (WTW remains third largest in the large account
space). We expect AJG to continue to focus on share gains, including further
international expansion, while maintaining margins near 30%.
Brown & Brown (BRO): In addition to robust organic growth, BRO has been
highly active in M&A, including a recent push into the international markets
after years of focusing exclusively on the U.S. The company’s margins are
peer-leading, which we expect to continue.
Marsh & McLennan (MMC): Through successful organic and acquisitive
growth initiatives, MMC's scale gap as the world's largest insurance broker
has widened over the years. S&P-adjusted EBITDA margins improved in 2023,
a trend we expect to persist on operating leverage and efficiency gains.
Willis Towers Watson (WTW): After a period of disruption following the Aon
deal termination, WTW has demonstrated notably improved organic growth.
S&P adjusted margins have come down on restructuring costs, but we expect
notable improvement in 2024 as these costs subside and increased savings
from the company’s transformation program are realized.
16
Investment-Grade Spotlight: Growth And Performance
Profitability
Source: Company data, S&P Global Ratings.
11%
9%
11%
15%
9%
8%
9%
7%
-10%
-5%
0%
5%
10%
15%
20%
25%
0
5
10
15
20
25
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
3023
2021 2022 2023f2024f
AON AJG BRO MMC WTW Average
Bil $
Total revenue Revenue growth Organic growth
32%
31%
31%
32%
0%
10%
20%
30%
40%
0
1
2
3
4
5
6
7
8
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 LTM
Q3
2023
2021 2022 2023f 2024f
AON AJG BRO MMC WTW Average
Bil. $
Total EBITDA EBITDA margin
17
Investment-Grade Spotlight: Financial Profile
Capital deployment: Three-year average*
AON: Credit metrics will be weak for the rating following the NFP acquisition, including leverage
above 3x, but we expect them to improve through performance gains, somewhat lower discretionary
spend on share buybacks and M&A post-transaction, and debt reduction.
AJG: We expect AJG to continue to maintain leverage at 2x-3x as it balances target leverage with
capital deployment, which is largely M&A focused (the company has not engaged in share buybacks).
BRO: BRO has lowered leverage comfortably below 3x following a spike in 2022 related to debt-
funded acquisitions. We expect leverage to further improve in 2024, depending on the scale of M&A.
MMC: Barring any opportunistic material acquisitions, we expect MMC to balance discretionary
spend on tuck-in M&A and shareholder activity, keeping leverage in the low 2x area.
WTW: We expect WTW to sustain leverage at 2.0x-2.5x as it adheres to a more conservative financial
policy. Shareholder distributions (which were elevated post Aon deal termination on excess cash) will
be dictated by levels of free cash flow and M&A, which we expect the company to resume in 2024.
Key credit metrics
*3Y Avg. reflects 2021 – LTM Q3 2023. Source: Company data, S&P Global Ratings.
17%
40%
36%
7%
0%
20%
40%
60%
80%
100%
AON AJG BRO MMC WTW 3Y Avg
Dividends Share repurchases M&A (inc. earnouts) CapEx
2.0x
2.5x
2.4x
2.5x
47%
30%
31%
30%
0%
20%
40%
60%
80%
100%
0x
1x
1x
2x
2x
3x
3x
2021 2022 LTM Q3
'23
2021 2022 LTM Q3
'23
2021 2022 LTM Q3
'23
2021 2022 LTM Q3
'23
2021 2022 LTM Q3
'23
2021 2022 2023f 2024f
AON AJG BRO MMC WTW Average
Median Debt-to-EBITDA (x) Median FFO-to-Debt (%)
Revenue growth composition
• In addition to benefiting from a favorable market impact, our portfolio
of mid-market brokers are largely focused on various growth
initiatives to keep organic growth high relative to historical levels
including:
– Enhancing and leveraging data and analytical capabilities to drive
premium flow and increase pricing power with carriers
– Significant producer recruitment
– Investments in specializations and industry verticals
– Internally placing wholesale and MGA business to capture a
greater share of the premium dollar in the insurance value chain.
– Risk mitigation/management expertise in existing and emerging
risks.
• Margins have compressed modestly from some upfront investments
related to these initiatives, among other items, but should begin to
stabilize and improve in 2024.
• Growth through M&A is substantial in the portfolio and many rated
brokers are expanding their geographic reach, scale, and content
capabilities through varying acquisition strategies.
18
Speculative-Grade Spotlight: Growth And Performance
Profitability
29%
31%
33%
31%
29%
29%
30%
25%
27%
29%
31%
33%
0
500
1000
1500
2000
2500
2019 2020 2021 2022 LTM Q3 '23 2023f 2024f
$ Mil.
Median Total Revenue Median EBITDA Median EBITDA Margin
Source: Company data, S&P Global Ratings.
5%
4%
9%
9%
8%
7%
15%
11%
13%
11%
9%
9%
20%
15%
23%
20%
17%
16%
0%
5%
10%
15%
20%
25%
2019 2020 2021 2022 2023f 2024f
Median Organic Revenue Growth Median Inorganic Revenue Growth
FOCF and FOCF-to-debt*
• Portfolio remains aggressively leveraged relative to many other corporate sectors given
robust cash flow.
• EBITDA “add-backs” are trending higher across many issuers (relating to items such as
producer hires and internal investments), creating wider divergences between company-
calculated leverage and S&P-calculated leverage.
• On the debt side, high earn-out obligations, prevalent preferred equity instruments, and
excess balance sheet cash from M&A pre-funding is also contributing to the divergence
between our and company-calculated leverage.
• The large portion of variable-rate debt has led to weakened coverage and cash flow to
debt from higher floating-rate benchmarks, although hedging instruments soften the blow.
• A wave of repricing activity beginning in late 2023 and into 2024, along with expected
gradual rate cuts beginning in mid-2024, should modestly help coverage metrics.
19
Speculative-Grade Spotlight: Financial Profile
Key credit metrics
Debt mix
6.8x
6.7x
7.6x
6.8x
7.1x
6.9x
2.5x
2.6x
3.0x
2.4x
1.9x
2.0x
0x
2x
4x
6x
8x
2019 2020 2021 2022 2023f 2024f
Median Debt-to-EBITDA Median EBITDA Int. Coverage
36%
26%
38%
64%
Variable Fixed Hedged Unhedged
Source: Company data, S&P Global Ratings.*FOCF is free operating cash flow
5.7%
6.8%
6.4%
4.1%
3.7%
4.8%
0%
2%
4%
6%
8%
0
50
100
150
200
250
2019 2020 2021 2022 2023f 2024f
Mil. $
Median FOCF ($) Median FOCF/Debt (%)
20
Non-Brokers
21
Non-Brokers – Peer Comparison
Business risk profile (BRP)
Financial risk profile (FRP)
Minimal Modest Intermediate Significant Aggressive Highly Leveraged
Excellent
aaa/aa+ aa a+/a a- bbb bbb-/bb+
Strong
aa/aa- a+/a
a-/bbb+
bbb bb+ bb
Satisfactory
a/a- bbb+ bbb/bbb- bbb-/bb+ bb b+
Asurion Group Inc.(B+/Stable)
Sedgwick L.P. (B+/Stable)
Fair
bbb/bbb- bbb- bb+ bb
Frontdoor Inc. (BB-/Stable)
HomeServe USA Corp. (BB-/Stable)
bb- b
MultiPlan Corp. (B/Stable)
Galaxy Finco Ltd. (B/Stable)
Weak
bb+ bb+ bb bb- b+
Zelis Holdings L.P. (B+/Stable)
b/b-
AIS HoldCo LLC d/b/a Franklin Madison (B/Stable)
Outcomes Group Holdings Inc. d/b/a Paradigm (B/Stable)
Bella Holding Co. d/b/a Medrisk (B-/Stable)
Mitchell TopCo Holdings Inc. (B-/Stable)
One Call Corp. (CCC+/Stable)
Vulnerable
bb- bb- bb-/b+ b+ b b-
As of Jan 30, 2024. Source: S&P Global Ratings.
22
Non-Brokers – At A Glance
The non-broker industry includes:
Business risk profile characteristics
• Our business risk profile scores range from satisfactory for market leaders
of significant size to fair/weak for the remainder of the portfolio generally
competing in smaller addressable markets with limited product diversification.
• Common strengths include top positions in specialized focus areas and
few formidable competitors.
• Common weaknesses include client concentrations, niche product
focuses, insourcing risk, and moderate revenue/cost volatility (generally higher
fluctuations relative to brokers).
• Median margin is about 20%, but performance varies widely by company/subgroup
(lowest ~0% and highest ~70%).
Source: S&P Global Ratings.
Financial risk profile characteristics
• Majority of credits are private-equity-owned with highly leveraged financial
risk profiles. Two are publicly traded.
• Weak credit protection measures driven by ownership considerations (frequent flips
and dividend recaps) and selective debt-driven M&A (acquisition activity
is lumpier/less frequent than brokers).
• Capex needs vary but are generally relatively modest (typically less than
5% revenues), and free cash flow is generally healthy.
• Favorable maturity profile and limited financial covenants.
Health care servicers
• Business-to-business outsourcing companies that help health care
payors control medical costs (such as out of network, pharmacy,
and radiology claims).
• Many of these credits are focused on using technology to serve
specific segments within the workers’ compensation space (ex.
physical therapy) and/or act as preferred provider organizations
(PPOs).
Claims administrators
• Independent providers of insurance claims management services to
insurance companies, self-insured companies, and captives.
• Some also offer additional services such as medical/administration
cost containment or specialty claims adjusting.
Warranty administrators
• Administrators of extended service contract programs that are
typically underwritten by third-party insurance carriers.
• These contracts can cover anything from smartphones and
electronics to home appliances and automobiles.
Rating distribution
Outlook distribution
23
Our sector view on insurance non-brokers is stable, with all credits on stable outlooks. We expect most companies to show relatively steady performance
as below-trend economic growth is absorbed by resilient insurance demand and company-specific product development.
Key expectations:
• Business growth and development to be mostly internally driven due to the specialty focus and composition of the marketplace, seeking deals to
round out competencies and incrementally improve scale, scope, and diversification.
• Health services companies to benefit from sustained demand for cost containment and payment solutions, given the enduring focus on trend
management and operational efficiency.
• Claim administrators to benefit from increasing outsourcing appetite from carriers, though performance is susceptible to underlying claim
volume.
• Warranty administrators remain most sensitive to economic drivers but benefit from normalizing supply chain and deepening client partnerships.
• Key credit metrics to be steady given underlying performance stability and consistent financial policy.
Non-Brokers – Credit Overview
18% 27% 27% 18% 9%
BB- B+ B B- CCC+
100%
Stable
Revenue trends
• Growth has been positive but subdued in the last couple of
years. Given fee-based revenue streams largely tied to claims
trend or services used, non-brokers have generally not
benefited from the market lift from rising premiums that our
commission-weighted broker portfolio has enjoyed.
• We expect growth will continue to vary widely based on
product suites and company-specific factors. However, the
market backdrop will provide revenue opportunity despite
sluggish economic growth and payroll as companies continue
to capture share and fill market space in their respective
niches.
• In contrast to the broker portfolio where inflation has been a
net benefit, inflation has been a net headwind for non-
brokers given added wage and cost pressures without the
top-line boost. However, most have successfully passed
through price increases to clients.
• Though easing inflation should help, ongoing industry factors-
- such as price competition, new client/contract
implementation, and technology/systems investments—will
keep margins in check.
24
Non-Brokers: Growth And Performance
Performance trends
8%
17%
3%
11%
4%
5%
6%
0%
5%
10%
15%
20%
-
400
800
1,200
1,600
2018 2019 2020 2021 2022 2023f 2024f
Mil. $
Median Revenue Median Revenue Growth
21%
21%
19%
20%
19%
21%
21%
0%
5%
10%
15%
20%
25%
-
50
100
150
200
250
300
350
2018 2019 2020 2021 2022 2023f 2024f
Mil. $
Median EBITDA Median EBITDA Margin
As of Jan. 30, 2024. Source: S&P Global Ratings.
Debt issuance activity
• Debt issuance in the last year has been predominantly refinancing
related. Following this activity, the portfolio has limited maturities
remaining until 2026.
• With generally steady performance and limited debt financing for
M&A or shareholder activity in the last year, most of the portfolio
had slightly lower leverage in 2023, but coverage declined due to
higher benchmark rates.
• We forecast generally steady credit metrics in 2024, but company-
specific factors and opportunistic M&A could easily swing
forecasts up or down.
25
Non-Brokers - Financial Profile
Key credit metrics
Upcoming debt maturities*
0
3
7
3
12
3
0
0
5
10
15
0
5
10
15
20
2024 2025 2026 2027 2028 2029 2030
Bil. $
Value No. of Maturites
4
16
3
5
0
2
4
6
8
10
12
14
16
18
0
5
10
15
20
2020 2021 2022 2023
Bil. $
Value No. of Non-Brokers
Debt mix
17%
60%
23%
83%
Variable Fixed Hedged Unhedged
Source: Company data, S&P Global Ratings.* Excluding revolving credit facilities
7.1x
6.7x
6.3x
6.4x
5.9x
6.0x
2.2x
2.6x
2.7x
2.3x
1.9x
2.1x
5%
7%
8%
7%
5%
6%
0%
2%
4%
6%
8%
10%
0x
2x
4x
6x
8x
2019 2020 2021 2022 2023f 2024f
Median Debt-to-EBITDA Median EBITDA Int. Coverage Median FOCF-to-Debt
26
Julie Herman
Director
Paul Lee
Senior Analyst
paul.lee2@spglobal.com
Francesca Mannarino
Associate Director
Brian Suozzo
Director
brian.suozzo@spglobal.com
Joe Marinucci
Director
Lawrence Wilkinson
Managing Director & Analytical Manager
Shivani Vaidya
CREDit Analyst
Prachi Meghani
Research Contributor
Megan O’Dowd
Associate Director
Analytical Contacts
27
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