Portfolio Manager Insights

Insurance brokers: A fragmented market with real potential

Consolidation in the insurance brokerage industry has strengthened businesses and created potential opportunities for investors, according to Fidelity’s Nicole Abernethy.

By: Nicole Abernethy
Updated: 3/9/2026
  • As larger insurance brokers acquire smaller firms, they’re not just growing, they’re thriving, says Fidelity Portfolio Manager Nicole Abernethy, who believes consolidation has produced stronger competitors, enhanced service offerings for customers, and attractive stock valuations.
  • “The insurance brokerage industry is highly fragmented, with many smaller firms struggling to compete,” explains Abernethy, who manages Fidelity® Select Insurance Portfolio. “As larger players step in and look to capitalize on these prospects via mergers and acquisitions, it may lead to increased market share, greater cost efficiencies and more-resilient business models.”
  • In helming the industry-focused equity strategy, Abernethy targets insurance firms that generate a high and sustainable return on equity, given their unique underwriting, distribution and scale advantages. She also prefers companies that make strong investments in their business to drive earnings growth.
  • Abernethy notes that many insurance brokers tend to be quite small, including “mom-and-pop” businesses with an owner who may be looking for either an exit strategy or liquidity. “That’s because industry factors often make it considerably more difficult for them to compete with larger, more-established players,” she says.
  • As a result, market consolidation creates a potential win-win situation for buyers and target firms alike, as well as their customers.
  • Abernethy is particularly focused on acquiring firms seeking to gain scale, broaden their service offerings and achieve cost efficiencies, making them more competitive and appealing to consumers.
  • Meanwhile, the business being acquired secures liquidity and a pathway to growth under the umbrella of a larger, generally more resource-rich organization.
  • As an example, Abernethy cites Arthur J. Gallagher, the fund’s largest insurance brokerage holding (as of January 31, 2026) and one she likes for its considerable scale, recognizable brand, strong relationships with primary insurers, centralized back-office operations and advanced analytics.
  • In August, Gallagher acquired AssuredPartners at an attractive price, which, in Abernethy’s view, exemplifies the firm’s ability to integrate new businesses both quickly and relatively seamlessly, supporting growth and efficiency.
  • The portfolio also has favored Brown & Brown, a smaller but equally promising broker well-positioned to capitalize on consolidation, according to Abernethy.
  • “As this dynamic competitive landscape evolves, I will continue to emphasize long-term potential as insurance brokers navigate the challenges and opportunities that come with ongoing industry consolidation,” she concludes.
FEATURED FUND

Fidelity Select Insurance Portfolio (FSPCX)

Seeks capital appreciation.

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