Fitch Ratings released Thursday a report on the U.S. insurance brokerage industry, noting top-line revenue growth has “not changed significantly” this year but operating earnings for its index of five firms was up 15%.
The average reported revenue growth for the five companies tracked in the Fitch insurance broker index (FIBI) was 8% year-to-date in 2012, while the median reported revenue growth for the same period was 5%.
The report, dubbed 2013 Outlook: U.S. Insurance Broker Industry, predicts revenues and earnings in 2013 are anticipated to be "relatively stable" compared with numbers reported during the first three quarters of 2012.
FIBI is comprised of Marsh & McLennan Companies Inc., Aon plc, Willis Group Holdings Ltd., Arthur J. Gallagher & Co. and Brown & Brown Inc.
"Operating earnings increased by nearly 15% for the FIBI in the first nine months of 2012," due "almost entirely" to improvement at Willis and Marsh & McLennan, Fitch says. "The brokers' core insurance business has benefited from favourable pricing trends and a cautious return to contingent commissions."
Fitch noted both Marsh & McLennan and Willis Group are getting new chief executive officers. Effective Jan. 2013, Daniel Glaser, currently president and chief operating officer of Marsh & McLennan, will replace Brian Duperreault as CEO.
Under Duperreault, Fitch says, "MMC's operating performance improved dramatically, both on an absolute basis and relative to peers." Fitch added the firm "can sustain these measures at or near recent levels."
Meanwhile, Fitch notes, Dominic Casserly, a senior partner of McKinsey and Company, is scheduled to replace Joe Plumeri as CEO of Willis Group Holdings.
"While it is unclear whether Willis' strategic direction will differ under Mr. Casserly's leadership, Fitch does not expect that Willis' solid competitive position and financial performance will change materially in the near to medium term."