NU Online News Service, April 19, 2:34 p.m. EDT

Publicly traded insurance brokers are expected to underperform stocks on the S&P 500 Index coming out of the recession, and Aon is rated the best of the bunch, according to an analyst's note from Citigroup.

In a first-quarter 2010 preview from Citigroup Global Markets, the analysts said historically in a recession, the stock of publicly traded brokers has exceeded the S&P Index. Currently the brokers--Aon, Arthur J. Gallagher, Brown & Brown, Marsh and Willis--are outperforming the S&P Index by 1.6 percent.

From Dec. 2007 to now, broker stock performance is at negative 16.7 percent, while the S&P 500 stands at negative 18.3 percent, the note said.

However, coming out of a recession, brokers historically have not fared as well, said Citigroup. From March 9, 2009 to today, Citigroup said the S&P has outperformed brokers by 41 percent.

Of the publicly traded brokers, Aon is rated the best by Citigroup because of increased margin with a long-term margin expansion goal of 25 percent, which the analysts said they expect Chicago-based Aon to meet by 2012.

Marsh was also credited with growing margin by Citibank, driving margin in the last eight quarters from 8.6 percent to 18 percent. However, Citigroup cautioned that "expense efficiencies are beginning to become more difficult to extract."

While a new agreement with the New York Attorney General's Office allows for the taking of contingent commissions once again, the revenues are expected to take time to work into earnings, according to the analysis.

Overall, Citigroup said it estimates that being allowed to contingents will add 5-to-10 percent to the revenue streams of the brokers.

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