Producer sector profits set to flourish in 2014, analyst says

Revenue and earnings for US insurance brokers will improve next year, according to a recent ratings agency report.

Producer sector profits set to flourish in 2014, analyst says

Life & Health

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On the heels of a government report suggesting producer employment is heading for historic thresholds, Fitch Ratings is adding to the good news: profits for independent agents and brokers are also set to rise in 2014.

According to its “US Insurance Broker Industry” outlook report, revenue and earnings for producers will show “modest improvement compared with levels reported in the first nine months of 2013.” Fitch attributes the growth to “the continued but moderating trend of pricing improvement” in commercial insurance lines.

Without giving specific growth predictions, Fitch said that “favorable operating fundamentals” will improve producer profit margins and interest coverage, particularly for larger brokerages. Other producers set to see profit increases include those specializing in employee benefit practices and healthcare consulting.

Fitch also noted that selective acquisitions will play a part in increased organic revenues for brokerages, with the “recent trend of middle-market benefits brokers consolidating with larger national and global brokers…likely [to] continue.”

Fitch expects producer profits to increase at least through the first half of 2014, but did say that it sees “limited potential” for the trend to continue in the long-term. However, the agency noted that producer revenue has at least remained stable after the “soft insurance market and deep economic recession” of 2011, largely due to continued economic growth in most sectors.

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