Insurance brokers can look forward to somewhat better revenues and earnings in 2015 compared to the first three-quarters of this year, according to a new report by Fitch Ratings of Chicago.
Fitch researchers discuss key factors supporting the stable rating outlook and stable sector outlook in "2015 Outlook: U.S. Insurance Broker Industry." This report briefly updates current events and analyzes trends in credit fundamentals and operating performance.
Aggregation of financial data from a group of publicly trade brokers revealed that:
- Profit margins improved in 2014, especially for the largest brokers, Aon plc and Marsh & McLennan Companies Inc.
- Financial leverage increased for several organizations, particularly Arthur J. Gallagher & Co. and Brown & Brown, Inc. These companies completed large acquisitions funded in part with new debt financing. Interest coverage remains favorable and supports current rating levels.
Fitch expects prospective operating performance and balance sheet strength to continue to support existing ratings for the brokers in its ratings group. Despite anticipating modest improvement in key credit fundamentals in 2015, Fitch sees limited potential for rating changes over the next 12 to 18 months.
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