According to the Fitch Ratings' 2020 U.S. Insurance Broker Outlook, things are looking rosy for publicly-traded brokers. Organic growth is expected to be very, very high and pricing trends in commercial insurance are on the rise.
The ratings firm’s senior director Martha Butler said brokers will see stable to modestly improving ratings in 2010. “Fitch forecasts a stable operating environment for the insurance broker sector. Although profitability levels and organic revenue growth may be at or nearing peak, strong cash flow continues to support servicing of debt obligations,” she said.
The outlook for insurance brokers will be stable because of that strong organic revenue growth and favorable profitability. Earnings stability is expected because of:
• Diverse product and geographic platforms
• Strong customer retention
• Technology investments
Keefe, Bruyette & Woods (KBW) agrees with Fitch and basically said so in its analysis of Brown & Brown.
“Margins for insurance carriers are under pressure as current loss trends worsen and favorable prior year reserve development fades. Carriers respond by raising prices — the benefits of which accrue directly to brokers who collect commission on higher prices but don't pay claims," KBW said.
Source link: Insurance Journal