Market conditions promote continued favourable margins for US brokers

Strong revenue growth for publicly traded US insurance brokers is expected for 2020 given near peak level organic growth and favourable US commercial lines insurance pricing trends, according to Fitch Ratings' 2020 US Insurance Broker Outlook report.

The report said margins remain consistent with investment-grade ratings and are expected to be stable-to-modestly improving in 2020.

"Fitch forecasts a stable operating environment for the insurance broker sector,” said Martha Butler, senior director, Fitch Ratings. “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.”

Fitch's sector outlook for US insurance brokers remains stable supported by strong organic revenue growth and continued favourable profitability. Earnings stability going forward is expected given diverse product and geographic platforms, strong customer retention and technology investments to leverage the industry's value proposition.

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