Fitch Ratings expects that prospects for revenue and earnings growth for U.S. insurance brokers in 2012 will likely match or exceed levels reported for the first nine months of 2011. Nevertheless, the competitive fundamentals of the property/casualty insurance market and tepid pace of the global economic recovery will continue to challenge more meaningful improvement in operating performance.
Top-line gains could benefit from pricing increases in select business lines that will benefit commission-based brokerage revenues over the next 12 months. However, Fitch expects brokers' revenue growth to be modest due to mostly flat rates in the broader commercial insurance market and a shrinking supply of acquisition targets of a size that would significantly augment the acquirers' total revenues.
Fitch expects credit trends in 2012 to be favorable, due largely to anticipated earnings growth from incremental revenue gains and margin expansion. While performance over time varies by company, Fitch expects that the brokers' run-rate performance will remain consistent with investment-grade debt ratings.
The full report '2012 Outlook: U.S. Insurance Broker Industry' is available at www.fitchratings.com.