Favourable U.S. commercial lines pricing trends coupled with high levels of organic growth is expected to contribute to strong revenue expansion for publicly traded U.S. insurance brokers in 2020, according to Fitch Ratings.
Fitch notes that current market conditions suggest a continuation of favourable margins for U.S. insurance brokers in 2020. The ratings agency states that margins remain consistent with investment-grade ratings and are expected to be stable-to-modestly improving next year.
Overall, the ratings agency has maintained a stable outlook for U.S. insurance brokers, driven by strong organic growth, revenue growth, and a continuation of favourable profitability.
Going forward, Fitch expects that earnings stability will be a feature of the sector as a result of diverse product and geographic platforms, strong customer retention and also technology investments to leverage the industry’s value proposition.
The Ratings outlook also remains stable, and Fitch says that this is promoted by the industry’s balance sheet strength and operating performance being supportive of current ratings.
Martha Butler, Senior Director, Fitch Ratings, commented: “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.
“Financial leverage is expected to decline from recent, more elevated levels, for several brokers in Fitch’s coverage universe and these lower targets have been incorporated into current ratings.”
