Investing.com -- On April 25, 2025, Moody’s Ratings affirmed the B2 corporate family rating and B2-PD probability of default rating of The Baldwin Insurance Group Holdings, LLC (NASDAQ: BWIN ), the primary subsidiary of the publicly traded The Baldwin Insurance Group, Inc. Moody’s also confirmed the B2 ratings on Baldwin’s senior secured notes, senior secured first-lien term loan, and senior secured first-lien revolving credit facility.

The rating outlook for Baldwin was adjusted to stable from negative, reflecting the company’s improved profitability, decreased financial leverage, and the expectation of increased free cash flow now that the majority of its contingent earnout obligations have been paid.

The affirmation of the rating reflects Baldwin’s expanding market presence in the distribution of commercial and personal property & casualty insurance, employee benefits, and Medicare-related products and services to middle market businesses and individuals, primarily in the US. Baldwin offers its products through distinct channels across three business segments: Insurance Advisory Solutions; Underwriting, Capacity & Technology Solutions; and Mainstreet Insurance Solutions.

Driven by organic growth, Baldwin has improved its EBITDA margin and continues to focus on organic growth rather than acquisitions, improving operational efficiency and effectiveness, and reducing its financial leverage. However, these strengths are balanced by Baldwin’s significant debt burden and limited interest coverage due to previous acquisitions primarily funded with debt.

In 2024, Baldwin reported revenue of $1.4 billion, an increase from $1.2 billion in 2023, largely driven by organic growth in core commissions and fees. The company’s EBITDA margin improved in 2024 as it expanded its businesses and generated operational efficiencies. Despite weak free cash flow for its rating category in 2024, free cash flow is expected to improve in 2025.

As of the end of 2024, Baldwin’s pro forma financial leverage was around 6.5x. It is anticipated that Baldwin will reduce its pro forma debt-to-EBITDA ratio below 6.5x, with interest coverage above 1.5x and a free-cash-flow-to-debt ratio in the mid-single digits. The company has pledged to its shareholders to operate with moderate net financial leverage.

Several factors could lead to an upgrade of Baldwin’s ratings, including profitable growth with further geographic diversification in the US, a debt-to-EBITDA ratio below 5.5x, interest coverage above 2.5x, and a free-cash-flow-to-debt ratio above 6%. Conversely, disruptions to existing operations due to the company’s rapid growth, a debt-to-EBITDA ratio above 6.5x, interest coverage below 1.5x, or a free-cash-flow-to-debt ratio below 3% could result in a downgrade of Baldwin’s ratings.

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