Marsh & McLennan Companies, Inc. (NYSE:MRSH) closed at $177.01 on October 13. The stock has returned 2% over the last six months, compared to a 21.5% return for the Insider Monkey Billionaire Index and 14.0% for State Street SPDR S&P 500 ETF Trust. Aon plc (NYSE:AON) closed at $274.71 and has returned -15.6% over the same six months. Neither of them cleared either benchmark over that period.
Most of what these two companies do is arrange insurance between a client and an underwriter, then take a fee for it. They are paid for making the placement rather than for carrying the risk, which is a more comfortable way to earn a living than insuring anything. They share that arrangement, and they are not making equal use of it.
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Both Earn a Fee on Risk They Never Carry:
A broker places risk rather than holding it. When a hurricane lands, the underwriter pays the claim, and the broker has already banked its commission. That is why these businesses come through catastrophe years that damage their clients and their suppliers alike.
The moat is the client relationship. A large company rarely changes broker, because the broker already knows its risks, its history, and its claims. That stickiness is what pays for a 26.32% operating margin at Marsh McLennan and 23.46% at Aon, both earned on advice rather than on an investment portfolio. It is also what we were screening for in the financial stocks we flagged as underpriced, where the name we put first has returned 13% since.
One Is Growing, and the Other Is Not:
This is where they separate. Marsh McLennan grew revenue 6.20% in the most recent quarter while Aon managed 2.20%, and Aon’s earnings fell 4.80% over the same period. One broker is compounding, and the other is digesting.
Marsh also keeps more of what it reports. It turns its profit into noticeably more cash than Aon does, while Aon collects slightly less cash than the profit it books. A broker has no factories and no inventory, so that difference is about what each one is spending to grow.
The risk is shared, and it is simple. Commissions are charged on premiums, and premiums are softening across much of the industry, so a broker’s revenue falls when its clients’ insurance gets cheaper. That exposure is what analysts were pricing in the oversold insurers analysts still back.
The Valuation Case:
Aon trades at 13.48 times next year’s earnings against 14.97 for Marsh McLennan, on analyst consensus estimates. Aon is the cheaper of the two. That discount is doing a job rather than sitting there as an opportunity. Marsh is growing nearly three times as fast and keeping more of its profit as cash, and that is what the premium buys. Paying a little more for the business that is still compounding is the usual resolution of this trade.
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Conclusion:
Both companies sit in the best seat in insurance, taking a fee on risk that somebody else carries. The difference between them is not the model but the execution. Marsh McLennan is growing faster and turning more of its profit into cash, and it costs more for exactly that reason. Aon is cheaper because its revenue has nearly stopped growing and its earnings have been falling. The discount is the market pricing a real difference rather than missing one.
Market Sentiment:
Marsh & McLennan Companies, Inc. was held by 63 hedge funds with a combined stake value of about $2.40 billion at the end of Q2 2026 in the Insider Monkey database. This is up from 55 hedge fund holders with a cumulative investment value of around $2.89 billion in the previous quarter.
Aon plc (NYSE:AON) was held by 61 hedge funds with a combined stake value of about $3.98 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 65 hedge fund holders with a cumulative investment value of around $4.14 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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