Strong revenue growth for publicly traded U.S. insurance brokers is expected for 2020 given near peak level organic growth and favorable U.S. commercial lines insurance pricing trends. Further, margins remain consistent with investment-grade ratings and are expected to be stable-to-modestly improving in 2020, according to Fitch Ratings’ 2020 U.S. Insurance Broker Outlook report.
“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,” said Martha Butler, Senior Director, Fitch Ratings.
Fitch’s sector outlook for U.S. insurance brokers remains stable supported by strong organic revenue growth and continued favorable 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.
The Rating Outlook remains Stable, meaning there is limited potential for rating changes over the next 12-18 months. Rating stability is also promoted by the sector’s balance sheet strength and operating performance being supportive of current ratings. Potential actions on individual companies will reflect performance against rating sensitivities, specifically around financial leverage, as measured by debt/EBITDA.
The full report “Fitch Ratings 2020 Outlook: U.S. Insurance Broker Industry” is available at www.fitchratings.com or by clicking on the link.