Executive Summary / Key Takeaways

• Strategic Transformation Underway: The Baldwin Group is executing its "3B30 Catalyst program," a three-year initiative leveraging automation and artificial intelligence to enhance operational efficiency and unlock new growth avenues, targeting $40 million in annualized savings by the end of 2028.
• Embedded Insurance Leadership: Baldwin is solidifying its position as a leading provider of embedded home insurance solutions, utilizing proprietary technology to achieve significantly higher bind rates and expand partnerships with top homebuilders and national mortgage originators.
• Financial Inflection Point Achieved: With the substantial completion of earnout obligations, Baldwin anticipates accelerated deleveraging, robust free cash flow generation, and enhanced capital allocation flexibility, including a potential $200 million share buyback program.
• Resilient Organic Growth Trajectory: Despite near-term market headwinds from softening property rates and Medicare business disruption, Baldwin projects high single-digit organic revenue growth for 2026, with an expected acceleration in the latter half of the year, underpinned by its industry-leading sales velocity.
• Diversified and Integrated Growth Engines: The company's three operating segments are strategically aligned for growth, with the Underwriting, Capacity & Technology Solutions (UCTS) segment expanding proprietary capacity through a new reciprocal exchange and Mainstreet Insurance Solutions (MIS) capitalizing on its embedded distribution channels.

A New Era for Risk Management

The Baldwin Insurance Group, Inc. (NASDAQ:BWIN), an independent insurance distribution firm, is carving out a distinctive position in a rapidly evolving risk landscape. Founded in 2011 and operating as BRP Group, Inc. until its rebranding in May 2024, Baldwin has built a vertically integrated model focused on delivering indispensable expertise and innovative solutions across the United States. The industry itself is characterized by increasing complexity, driven by factors such as the rising frequency and severity of natural catastrophes and the persistent challenge of social inflation in casualty lines. This environment underscores the critical demand for specialized risk management advice and tailored insurance products.

Baldwin's strategic response to these dynamics is rooted in its foundational pillars of talent and technology. The company's integrated operating platform, coupled with a relentless focus on client outcomes, positions it to capture market share against both larger, more generalized global brokers and nimble insurtech startups. While direct quantitative comparisons with all private competitors are challenging to ascertain, Baldwin's consistent top-decile performance in new business generation highlights its competitive strength. The company's approach emphasizes deep client relationships and a comprehensive suite of services across its three operating segments: Insurance Advisory Solutions (IAS), Underwriting, Capacity & Technology Solutions (UCTS), and Mainstreet Insurance Solutions (MIS).

The Technological Edge: Fueling Growth and Efficiency

At the heart of Baldwin's competitive strategy is its proprietary technology platform, which serves as a significant differentiator in the insurance distribution landscape. This platform, often referred to as the "Future platform" in internal discussions, underpins the company's ability to deliver technology-enabled insurance products and seamless digital experiences. A prime example is its embedded home insurance technology, designed to integrate directly into the mortgage origination and home sale processes. This digital experience has demonstrated a remarkable ability to bind home insurance policies at a rate 3.5 times higher than traditional, non-digital channels, significantly enhancing customer conversion and efficiency.

Further enhancing its technological moat, Baldwin is integrating AI-powered real-time agent advice into its digital agent workflow. This innovation is driving momentum in conversion rates and presents a clear opportunity for margin expansion over the medium to long term. The company is also actively developing new products, such as an innovative renters product slated for launch next year, which will be embedded directly into the rent ledger, and MSI Cyber for Managed Care Organizations, a specialized cyber insurance program. These developments underscore Baldwin's commitment to leveraging technology for product innovation and market penetration.

The strategic impact of this technological differentiation is multi-faceted. It not only creates a competitive moat by streamlining operations and enhancing client engagement but also directly contributes to improved financial performance through lower operational costs and higher customer acquisition efficiency. This technological prowess allows Baldwin to compete effectively with larger, more established players like Marsh & McLennan Companies and Aon plc by offering more agile and specialized solutions, particularly in niche markets.

Segment Performance and Strategic Execution

Baldwin's diversified operating groups each contribute uniquely to its growth narrative, demonstrating resilience and strategic adaptation in a dynamic market.

Insurance Advisory Solutions (IAS)

The IAS segment, which provides commercial risk management, employee benefits, and private risk management solutions, reported flat organic revenue growth in the third quarter of 2025. However, excluding a procedural accounting change that defers revenue recognition, organic growth was 4%, with core commissions and fees growing 6%. This segment continues to exhibit industry-leading sales velocity, reaching 20% in Q3 2025 and 19% year-to-date, significantly outpacing the industry median of 12.2% and top quartile of 15.9%. This strong new business generation is a testament to the value clients place on Baldwin's advice and solutions.

Despite this internal strength, IAS faced a meaningful headwind of -5.7% from renewal premium change (RPC) in Q3 2025, driven by client caution amid macro uncertainty and softening in large cat-exposed coastal property pricing. The employee benefits business also experienced an 800 basis point headwind, primarily due to exposure changes in a softer employment environment, though this is expected to normalize by early 2026 as healthcare cost trends drive premium inflation.

Underwriting, Capacity & Technology Solutions (UCTS)

The UCTS segment delivered robust organic revenue growth of 16% in Q3 2025. This performance was fueled by continued strength in its multifamily portfolio, which saw 16% growth in commissions and fees, and its commercial umbrella portfolio, which grew organic revenue by 15%. A strategic highlight for UCTS is the introduction of its Captive business, the MSI Multifamily Series Protected Cell, which became effective January 1, 2025, and contributed $5.9 million to core commissions and fees in Q3 2025.

Strategic initiatives are central to UCTS's long-term growth. In July 2025, Baldwin began migrating renewals of its builder book from QBE Insurance Corporation into its newly formed Texas-domiciled reciprocal insurance exchange, BRIE. While this migration creates a temporary headwind until April 2026 due to reduced commissions, it is expected to reverse into a multiyear tailwind as attorney-in-fact fees accrue. The company also completed the acquisition of MultiStrat Group in April 2025, enhancing its ability to source alternative reinsurance capital. However, the E&S homeowners book experienced a 400 basis point drag on organic growth in Q3 2025, reflecting disciplined underwriting amidst a rapidly softening property market.

Mainstreet Insurance Solutions (MIS)

The MIS segment, focused on personal, commercial, and life and health solutions through sheltered distribution channels, reported slightly negative organic revenue growth in Q3 2025. Excluding the one-time commission reset on the QBE Builder book, organic growth was 8%. The segment faced headwinds from this commission reset and elevated attrition in its Medicare business due to broader managed care market disruption, with Medicare pressures expected to persist through the end of 2025 before stabilizing in 2026.

Despite these challenges, MIS is demonstrating exciting momentum in its embedded home insurance businesses. Following the acquisition of Hippo (HIPO)'s Homebuilder Distribution Network in July 2025, Baldwin now facilitates home insurance for 20 of the top 25 homebuilders across the country. The embedded mortgage and real estate business has expanded to 10 channel partners, with a top 20 national mortgage originator going live in Q3 2025, showcasing promising early success with its digital platform. This positions Baldwin as a leading embedded personal lines distribution platform in the substantial $500 billion U.S. personal lines market.

Financial Strength and Capital Deployment

Baldwin's financial performance in Q3 2025 reflects its ability to execute in a dynamic environment. Total revenue increased 8% year-over-year to $365.4 million, with organic revenue growth of 5%. Year-to-date, total revenue grew 9% to $1.158 billion, and organic revenue growth reached 9%. Adjusted EBITDA was largely flat year-over-year at $72.5 million in Q3 2025, bringing year-to-date adjusted EBITDA growth to 9%. Adjusted diluted EPS for Q3 2025 was $0.31, aligning with guidance.

A significant financial inflection point has been reached with the extinguishment of the vast majority of earnout liabilities from prior partnerships, with $57 million paid in cash in Q3 2025. This achievement is expected to accelerate deleveraging, with net leverage at approximately 4.1x at the end of Q3 2025, on track to fall below 4x by year-end 2025. This improved financial flexibility will enable a more robust capital allocation strategy. Baldwin's highest priority remains organic reinvestment in its technology platforms, specialized talent, and sales force. M&A will continue to be an opportunistic and disciplined lever. Furthermore, once net leverage is comfortably below 4x, the Board intends to authorize a share buyback plan of up to $200 million, providing an additional tool for shareholder value creation.

The company has also actively optimized its debt structure, successfully repricing its Term Loan B to SOFR plus 250 basis points, resulting in approximately $5 million in annual interest expense savings. A floating-to-fixed interest rate swap with a notional amount of $500 million, fixed at 3.244%, was also executed in September 2025 to mitigate interest rate risk. As of September 30, 2025, Baldwin held $89.7 million in cash and cash equivalents and had $524 million in available borrowing capacity on its Revolving Facility.

Outlook and the "3B30 Catalyst"

Baldwin's outlook for the coming periods reflects both continued growth and strategic transformation. For Q4 2025, the company anticipates revenue between $345 million and $355 million, with mid-single-digit organic revenue growth. Adjusted EBITDA is projected to be between $68 million and $73 million, and adjusted diluted EPS between $0.28 and $0.32 per share.

Looking ahead to 2026, preliminary guidance points to revenue in the range of $1.66 billion to $1.7 billion, with high single-digit organic growth, expected to be back-half weighted. Adjusted EBITDA is projected between $380 million and $400 million, and adjusted diluted EPS between $1.95 and $2.10. This trajectory implies a 5-year CAGR in the high teens to low 20s for these metrics, alongside double-digit growth in operating free cash flow. The acceleration in organic revenue growth in the latter half of 2026 is expected as the temporary headwinds from the procedural accounting change and the QBE commission reset annualize.

A cornerstone of Baldwin's future strategy is the "3B30 Catalyst program," a three-year transformation launched in Q3 2025. This initiative is designed to accelerate the infusion of automation, business process optimization, and artificial intelligence across the organization. The program anticipates cumulative transformation charges of approximately $40 million by the end of 2028, with cumulative savings over the same period of approximately $50 million, leading to projected run rate annualized savings of $40 million by the end of 2028. These savings are net of reinvestment, demonstrating a commitment to both efficiency and continued strategic growth.

Risks and Competitive Dynamics

While Baldwin's investment thesis is compelling, investors should consider several pertinent risks. The IAS segment faces ongoing pressure from renewal premium change (RPC) headwinds, which, while expected to incrementally improve, are not anticipated to fully reverse into a tailwind in the near term. The UCTS segment is experiencing a drag from its E&S homeowners book due to a softening property environment and increased competition, requiring disciplined underwriting. The MIS segment is contending with the temporary commission reset on its QBE builder business and elevated churn in its Medicare book.

Broader industry trends also present challenges. The Q3 2025 Market Pulse Report indicates continued softening in the commercial property market, balanced by increasing pressure in litigation-exposed casualty lines. The California wildfires in early 2025, estimated to be a top-three catastrophe loss event, introduce uncertainty regarding reinsurance pricing for June 1 renewals, potentially impacting gross commission rates for some MGA programs.

In the competitive landscape, Baldwin differentiates itself through its specialized focus and technological capabilities. Unlike global giants such as Marsh & McLennan Companies (MMC), Aon plc (AON), Willis Towers Watson (WTW), and Arthur J. Gallagher & Co. (AJG), Baldwin emphasizes a vertically integrated model and embedded solutions. Its top-decile sales velocity in IAS, significantly higher than industry peers, underscores its ability to win new business. The company's proprietary technology, particularly in embedded insurance, provides a distinct advantage over traditional brokers and even some insurtechs by offering seamless, high-conversion digital experiences. Baldwin's ability to attract top talent, often from larger, consolidating platforms, further strengthens its competitive position.

Conclusion

The Baldwin Group is at a pivotal juncture, transitioning from a period of significant acquisition-related earnout payments to one of enhanced financial flexibility and strategic execution. The company's core investment thesis is underpinned by its robust organic growth engine, driven by industry-leading sales velocity and a differentiated, technology-enabled business model. Strategic initiatives like the 3B30 Catalyst program and the expansion of its embedded insurance platforms are poised to unlock substantial operating leverage and accelerate growth.

While near-term market headwinds and specific operational challenges exist, Baldwin's management has demonstrated a clear roadmap for addressing these, with many expected to reverse into tailwinds by mid-2026. The anticipated acceleration in deleveraging and the planned share buyback program signal a commitment to shareholder value creation. By leveraging its integrated approach, technological leadership, and disciplined capital allocation, Baldwin is well-positioned to continue its strategic ascent, delivering outsized results and solidifying its standing as a formidable player in the evolving risk management industry.