Revenue and earnings growth for U.S. insurance brokers in 2014 is expected to improve modestly over 2013, according to a report by Fitch Ratings.
Fitch issued a stable rating outlook and positive sector outlook for the insurance broker market.
Fitch said its stable rating outlook reflects its analysts’ expectation that “prospective operating performance and balance sheet strength will remain supportive of the existing ratings” for the brokers in Fitch’s ratings universe. Despite anticipating modest improvement in key credit fundamentals in 2014, Fitch said it sees limited potential for upgrades over the next 12 to 24 months.
Fitch said its positive sector outlook recognizes that the “continued but moderating trend of pricing improvement” in many commercial insurance business classes should provide a tailwind for organic growth at least through the first half of 2014.
Fitch also said that “favorable operating fundamentals” are anticipated to improve profit margins modestly and interest coverage for larger brokers going forward. New business opportunities should also benefit from continued economic improvement that will likely yield modest gains in insured exposures. The disruption caused by the rapidly evolving healthcare environment should be especially beneficial for the employee benefits and consulting businesses of the insurance brokers, according to Fitch.
The report includes an analysis of trends in operating performance and credit fundamentals, brief updates of recent events and the rating rationale for individual brokers in the rating universe.
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