BGC Partners has recorded a 9% growth in the revenue of its insurance brokerage business during the third quarter of 2020.
Insurance brokerage revenue totaled $43.3 million in Q3 2020, versus $39.7 million last year.
This contributed to total brokerage revenues of $417.2 million for the quarter, which was down 14% from $485.3 million previously.
Adding in revenues from other sources, BGC’s total revenues for Q3 were $455.0 million, representing a 12.7% decrease from $521.1 million in Q3 2019.
Notably, BGC’s insurance brokerage revenues were up a whopping 125% from Q3 2018, and revenue is expecting to grow by 20% in Q4, compared with the 2019 figures.
The company said that it had been helped by increases in global insurance rates across all business classes.
And it added that further market hardening is expected to result in higher premiums and increased brokerage commissions going forward.
“Insurance brokerage represents a massive global opportunity with a long runway for continued growth,” BGC stated.
In particular, BGC sees significant opportunities potentially arising out of recent market consolidations such as this year’s mega deal between Aon and Willis Towers Watson.
It suggests that this could cause risk placement concentration concerns by insurance carriers, with possible overlaps also causing brokers to seek global independent alternatives.
“We’ve made excellent progress this quarter with respect to our investments in Fenics and insurance brokerage. Our Fenics brokerage revenues grew by double digits for the second consecutive quarter. Fenics UST and Fenics GO, two of our newer fully electronic offerings, reached record levels of market share, and our insurance brokerage group is positioned to turn profitable for the fourth quarter and for the full year 2021,” said Howard W. Lutnick, Chairman and Chief Executive Officer of BGC.
“We believe the macro trends of accelerated adoption of electronic trading, record levels of global debt issuance, and a hardening insurance market will drive positive fundamentals for our businesses. In the third quarter, BGC generated strong revenue growth of 20 percent and 9 percent in its Fenics and insurance brokerage businesses, respectively,” he continued
“As a result of these improvements, we expect to match last year’s fourth quarter Adjusted Earnings, even in this tougher market environment. We view our stock as being demonstrably undervalued as our earnings return to 2019 levels in the fourth quarter, while our current stock price is over 50percentbelow where it was last year”
Steve Bisgay, Chief Financial Officer of BGC, also commented: “Our insurance brokerage group grew its revenues by 9 percent this quarter driven by new hires in aviation and reinsurance. We expect around 20 percent top-line growth next quarter to over $50 million as previous front office hires and newly launched business lines increase productivity.”
“Furthermore, our insurance brokerage group has reached a size and scale where we expect it to be profitable for the fourth quarter and improve BGC’s bottom line by over $25 million in 2021 compared to 2020.”
