UPDATE: UBS Upgrades Willis Group (WSH) to Buy (MMC) (AON)

(Updated - December 15, 2014 10:01 AM EST)

UBS upgraded Willis Group (NYSE: WSH) from Neutral to Buy with a price target of $50 (from $43). Marsh & Mclennan (NYSE: MMC) was maintained at Buy with a price target of $64 (from $55). Aon plc (NYSE: AON) was maintained at Neutral with a price target of $96 (from $90). Analyst Brian Meredith said fundamentals for insurance brokers should remain favorable in 2015.

"While the slowdown in commercial lines and decline in reinsurance pricing has some impact on insurance broker revenue growth, it should be more than offset by exposure growth from an improving global economic environment (UBS Economics is looking for G7 GDP to rise 2.28% in 2015 versus an estimated 1.65% rise in 2014). Also, an improving economy should benefit consulting businesses at the major insurance brokers. Another potential positive would be an increase in corporations moving to private healthcare exchanges in 2015," said Meredith.

"Organic revenue growth coupled with expense discipline should yield continued margin improvement, which combined with lower pension contributions will continue to drive strong free cash flow generation in 2015. We expect the brokers to use this free cash flow to make accretive acquisitions, raise dividends, and/or repurchase stock. Through organic revenue growth, and expense discipline, we see improving ROIC and potential upward EPS estimate revisions for major brokers," continued the analyst.

He added, "Short term interest rates are expected to rise in 2015, which will benefit fiduciary income for the insurance brokers. Moreover, while long-term corporate bond rates are down in 2014, our analysis indicates a minimal impact on pension benefit/expense in 2015."

For an analyst ratings summary and ratings history on Willis Group click here. For more ratings news on Willis Group click here.

Shares of Willis Group closed at $42.91 yesterday.

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