Executive Summary / Key Takeaways

• Strategic Inflection Point: The Baldwin Group has reached a pivotal moment, having fully extinguished all earnout liabilities from its initial five years as a public company. This transition unlocks significant capital allocation flexibility, enabling accelerated deleveraging and strategic investments.
• Resilient Organic Growth Engine: Despite near-term market headwinds, Baldwin continues to demonstrate industry-leading organic revenue growth, driven by robust new business generation (IAS sales velocity at 22% in Q2 2025) and strategic expansion in its Underwriting, Capacity & Technology Solutions (UCTS) segment.
• Technology-Driven Vertical Integration: Baldwin's core investment thesis is underpinned by its differentiated technology platform, MSI, and strategic initiatives like the Builder Reciprocal Insurance Exchange (BRIE) and MultiStrat partnership. These efforts enhance proprietary capacity, streamline product delivery, and create a competitive moat.
• Targeted Market Leadership: The company holds a market-leading position in embedded personal lines distribution, particularly in the homebuilding sector (Westwood now serves 20 of the top 25 homebuilders), and is building significant momentum in mortgage and real estate channels.
• Long-Term Aspiration with Near-Term Headwinds: While facing temporary pressures from property rate deceleration, E&S home market competition, and Medicare business disruption, Baldwin maintains an internal aspiration of $3 billion in revenue and a 30% adjusted EBITDA margin by 2029, signaling confidence in its durable, long-term growth trajectory.

A Vertically Integrated Vision: Setting the Scene for Baldwin's Evolution

The Baldwin Insurance Group, Inc. (BWIN) operates as a diversified independent insurance distribution firm, providing essential expertise and solutions in risk management, insurance, and employee benefits across the United States. Its strategic framework is built upon three core operating segments: Insurance Advisory Solutions (IAS), Underwriting, Capacity & Technology Solutions (UCTS), and Mainstreet Insurance Solutions (MIS). This structure supports an overarching strategy of vertical integration, leveraging technology to deliver bespoke client solutions and innovative risk capital formations.

Baldwin's journey to its current market position began with its IPO in October 2019, marking it as the first commercial insurance broker to go public in over two decades. This move initiated a period of rapid scale acquisition, expanding client capabilities and infrastructure. Key historical milestones, such as the 2022 acquisition of Westwood Insurance Agency, significantly bolstered its presence in the homebuilding industry. The company's rebranding in May 2024 to The Baldwin Insurance Group, Inc. underscored its evolving identity and strategic focus.

The insurance industry itself is undergoing significant shifts. A recent Q2 2025 Market Pulse Report from Baldwin reveals a bifurcated commercial insurance marketplace. Property insurance is seeing a return to stability and increased competition, while litigation-exposed casualty lines face mounting pressure. Broader secular trends indicate rising physical values at risk, increased concentration in catastrophe-exposed areas, and higher frequency/severity of natural catastrophe events. These dynamics, coupled with social inflation and tort trends, suggest an ongoing need for mid-to-high single-digit rate increases in the cost of risk over the long term. This complex environment highlights the critical role of sophisticated risk management and innovative insurance solutions, areas where Baldwin aims to differentiate itself.

Technological Edge: Baldwin's Differentiated Moat

At the heart of Baldwin's strategy lies its technological differentiation, particularly within its UCTS segment. The company's MGA platform, MSI, is central to manufacturing proprietary, technology-enabled insurance products. These products span commercial, personal, and professional lines, focusing on "sheltered channels" where technology and API integrations deliver speed, ease of use, and certainty of execution. An example is its national embedded renters insurance product, sold at the point of lease via integrations with property management software providers.

Baldwin's investment in technology extends to its strategic initiatives, which are designed to enhance its competitive moat and financial performance. The finalization of the third-party-led capitalization of the Builder Reciprocal Insurance Exchange (BRIE) in April 2025 is a "meaningful milestone" in vertically integrating across the value chain. BRIE, which began writing business in late Q2 2025, aims to provide innovative third-party risk capital solutions, ultimately supporting more efficient risk transfer outcomes for clients. This initiative is expected to materially increase the capture of Westwood's builder business into proprietary MSI programs, which currently sits at around 30%.

Further bolstering its technological and capacity capabilities, Baldwin completed a partnership with MultiStrat Group, a Bermuda-based reinsurance MGA platform, in April 2025 for $24.6 million. This acquisition adds an "important capability to source alternative reinsurance capital" for Baldwin's ceded clients and MGA business on a commissions and fees basis, without taking on balance sheet risk. The Captive business, TBG Assurance Company, LLC, established in January 2025, participates as a quota share reinsurer on MSI's multifamily programs. This initiative, focused on a non-cat-exposed, stable book of business, is designed to generate incremental contingent revenue and contribute to margin, showcasing Baldwin's ability to curate high-performing, low-volatility books.

For investors, this technological roadmap and vertical integration strategy are critical. They enable Baldwin to control more of the value chain, reduce reliance on external capacity, and offer more tailored, efficient products. This translates into enhanced customer loyalty, stronger pricing power in targeted segments, and a more resilient revenue stream, positioning Baldwin for sustained growth and margin expansion even amidst broader market volatility.

Competitive Positioning: Outpacing Peers with Specialized Focus

Baldwin operates in a highly competitive landscape, facing off against large, diversified global brokers such as Arthur J. Gallagher & Co. (AJG), Marsh & McLennan Companies, Inc. (MMC), Aon plc (AON), and Willis Towers Watson plc (WTW). While these larger rivals boast extensive global footprints and broader service offerings, Baldwin carves out its competitive niche through specialized focus, technology-driven efficiency, and superior new business generation.

Baldwin's IAS segment consistently demonstrates "top decile new business performance." In Q2 2025, its sales velocity reached 22%, significantly outpacing the industry median of 11.7% and the top quartile at 15.7%. This internally-driven new business production is a key differentiator, providing sustainability and consistency to its organic growth profile across economic and insurance market cycles. In contrast, larger competitors often rely on a blend of organic growth and substantial acquisitions, which can introduce integration challenges.

In the Mainstreet Insurance Solutions (MIS) segment, Baldwin's Westwood franchise has solidified its position as the "preeminent insurance agency for the homebuilding industry." The July 1, 2025, acquisition of Hippo's (HIPO) homebuilder distribution network further cemented this leadership, with Westwood now powering the home insurance experience for 20 of the top 25 homebuilders nationwide. This market-leading position, combined with growing momentum in mortgage and real estate embedded channels, highlights Baldwin's ability to dominate specific, high-growth niches. While direct quantitative market share figures for all niche competitors are not publicly detailed, Baldwin's strong performance in these areas suggests a significant competitive advantage.

However, Baldwin's competitive landscape is not without challenges. Its E&S homeowners book within UCTS faces "growing headwinds" from increased pricing pressure and competition. New entrants, significant new capacity from large multiline carriers, and increased capacity from London binders are creating a dynamic where Baldwin prioritizes underwriting discipline over chasing market share at unsustainable terms. This strategic choice, while impacting short-term revenue, safeguards the long-term integrity of its underwriting performance. Furthermore, Baldwin's relatively smaller global scale compared to AJG or MMC could result in higher customer acquisition costs in broader markets, but its agility and specialized value proposition allow it to thrive in its chosen segments.

Financial Performance and Liquidity: A New Chapter of Capital Flexibility

Baldwin's financial performance in Q2 2025 reflects a business undergoing strategic transformation amidst evolving market conditions. Total revenues for the quarter reached $378.8 million, contributing to a year-to-date total of $792.2 million. Organic revenue growth stood at 11% for Q2 2025 and 10% year-to-date, driven by strong new business and outperformance in MSI and the Captive. Adjusted EBITDA for Q2 2025 rose 14% to $85.5 million, with adjusted EBITDA margin expanding by 60 basis points year-over-year to 22.6%. Adjusted diluted earnings per share (EPS) grew 24% to $0.42.

Segment-specific performance highlights the diversified drivers of growth. IAS delivered 10% organic growth in Q2 2025, with commissions and fees increasing by $15.6 million. This was fueled by a robust 22% sales velocity, though partially offset by a muted 1.3% contribution from rate and exposure. UCTS posted an impressive 21% organic growth, with commissions and fees up $24.7 million, driven by strong multifamily (14% growth), homeowners (25-35% growth), and Juniper Re (over 100% growth). MIS, however, saw flat organic growth due to reduced QBE (QBE) builder commissions (effective May 1, 2025) and elevated churn in the Medicare business.

A significant financial milestone was achieved in Q2 2025, with Baldwin paying $57 million in cash earnouts, effectively "fully extinguishing all earnout liabilities associated with the partnerships completed during our first 5 years as a public company." This marks a "significant inflection" in the company's financial profile, freeing up substantial capital. As of June 30, 2025, Baldwin held $105.7 million in cash and cash equivalents and had $474.0 million of available borrowing capacity on its Revolving Facility.

The company's long-term debt includes a $935.8 million term loan facility and $600.0 million in Senior Secured Notes. Management's goal is to reduce net leverage to 4x or below by year-end, signaling a strong commitment to balance sheet health.

Outlook, Guidance, and Strategic Trajectory

Baldwin has updated its full-year 2025 guidance, reflecting both underlying business strength and anticipated market headwinds. The company now forecasts full-year revenue between $1.5 billion and $1.52 billion, while maintaining the bottom end of its adjusted EBITDA range at $345 million. Adjusted diluted EPS is expected to be between $1.62 and $1.67. Organic growth for the full year is projected in the high single digits, with double-digit growth in free cash flow from operations.

This revised outlook incorporates four key factors:

1. IAS Headwinds: An expected negative rate and exposure in the retail business, creating a $15 million to $20 million headwind to IAS organic revenue growth, primarily from property rate deceleration and sluggish construction starts.
2. UCTS Pressure: Continued growth pressure on the E&S home book in MSI, leading to an approximately $5 million reduction in expected commission and fee revenue.
3. MIS Medicare Impact: Renewal headwinds in the Medicare business, reducing revenue expectations by $7 million.
4. Revenue Recognition Shift: A procedural change in IAS revenue recognition timing, shifting approximately $10 million of H2 2025 revenue into 2026.

Despite these near-term challenges, management's confidence in the long-term trajectory remains robust. The ability to maintain the bottom end of the adjusted EBITDA guidance, even with revenue revisions, is attributed to "strong efficiency gains across our platform from the immense operating leverage that exists in our business." The company's internal "3B30 plan" to achieve $3 billion of revenue and a 30% adjusted EBITDA margin by 2029 underscores its aggressive growth aspirations. This plan is supported by continued investment in attracting and retaining talent, developing innovative products and solutions, and ongoing operational optimization.

Risks and Challenges

Investing in Baldwin comes with a set of identifiable risks. The "dramatic reduction in large cat-exposed coastal property pricing" and "continued macro uncertainty" present ongoing challenges for the IAS segment, potentially impacting renewal premium changes and project-based revenues. The UCTS segment faces "growing headwinds in our E&S homeowners book" due to intense competition and pricing pressure, necessitating underwriting discipline that may constrain growth in that specific area.

The MIS segment is contending with "disruption across the managed care landscape," leading to elevated turnover in its Medicare renewal book, a pressure expected to persist through 2025. Furthermore, the company is appealing a $2.4 million attorneys' fee award related to a class action lawsuit, with a potential loss range of $0 to $2.4 million, though a significant portion may be covered by insurance. While the company uses interest rate caps to mitigate risk, the variable nature of its debt (term SOFR + 300 bps on term loans, SOFR + 210-310 bps on revolving facility) means a 100 basis point increase in SOFR could increase annual interest expense by $10.4 million. These factors, while actively managed, introduce an element of uncertainty to short-to-medium term financial outcomes.

Conclusion

The Baldwin Group stands at a compelling juncture, having successfully navigated a period of aggressive expansion and now transitioning into a phase of enhanced financial flexibility. The complete extinguishment of earnout liabilities marks a significant inflection point, freeing capital for strategic deployment and accelerating the path to a strengthened balance sheet. This, coupled with an internally-driven organic growth engine that consistently outperforms industry peers, positions Baldwin for durable, out-term growth.

Baldwin's strategic investments in technology, particularly through its MSI platform, the Builder Reciprocal Insurance Exchange (BRIE), and the MultiStrat partnership, are not merely operational enhancements; they are foundational competitive advantages. These technological differentiators enable vertical integration, proprietary capacity, and efficient, tailored product delivery, creating a robust moat against larger, more diversified competitors. While near-term headwinds in property rates, E&S home markets, and Medicare present challenges, Baldwin's market-leading positions in embedded distribution channels and its unwavering commitment to underwriting discipline underscore a resilient business model. The company's ambitious "3B30 in 5" aspiration, though an internal target, reflects a clear strategic vision and confidence in its ability to leverage its unique strengths for sustained shareholder value creation.