Despite a difficult market environment for insurance brokers, Marsh is headed for continuing profitability, according to a leading investment bank's study.
William Wilt, a Morgan Stanley property-casualty insurance sector analyst, said New York-based Marsh's consulting and management businesses will give it an edge in the coming year in terms of profit growth.
"Moreover, rising insurance rates are a greater tailwind than at rival Aon," Mr. Wilt wrote.
In addition, Marsh's status as the only broker with a negative rating outlook could turn out to be a positive if a return to stable status acts as a catalyst for the stock, Mr. Wilt added.
Chicago-based Aon was enjoying the momentum of a rising stock, a new chief executive officer and operational benefits from years of restructuring, but that movement has since stalled.
Questions about the sale of its warranty businesses will linger, while improvements in market share gains and consulting "seem unlikely to materialize in one resurgent quarter," Mr. Wilt wrote.
London-based Willis will produce above-average revenue growth and expanded margins over time. "However, we think share price drivers such as strong earnings visibility, upside surprises and rising estimates are less likely in the near term for Willis," Mr. Wilt wrote.
Overall, the analyst wrote the brokerage group suffers from near-term earnings visibility challenges as they adjust to the loss of profitable contingent commissions. "The brokers are working toward higher margins while embracing the costs of new compliance and disclosure requirements," Mr. Wilt wrote.
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