Positive revenue outlook for large insurance brokers: Analysis

The fourth-quarter 2011 revenue outlook for large insurance brokers is positive, according to an analysis released Tuesday by investment bank Keefe, Bruyette & Woods Inc.

“We expect mid-single-digit revenue growth driven by gradually improving organic growth,” particularly for large brokers as they report their fourth-quarter 2011 results, said New York-based KBW in “P&C: A Glass Half Full.”

This growth will be partially offset, however, by declining contingent commissions, said KBW.

“With the growth in revenue, we believe the brokers may see modest improvement in margins over time,” said the report. The report also said KBW believes merger and acquisition activity “will continue to improve, particularly for the middle-market brokers.”

For property/casualty insurers, growth in the fourth quarter “may not be impressive, but we anticipate that it will also be ignored as focus will be on the strength of the Jan. 1 renewals and improving pricing trends in the U.S. primary commercial lines,” said KBW.

The report said reinsurance renewals globally appear to have been up in the 1% to 4% range. It also said it expects some insurers to report mid-single-digit rate improvement in commercial lines.

“Otherwise, we expect general flatness, which is an improvement from just months ago,” said KBW.

In a review of third-quarter results released in November, KBW said while pricing appeared to be improving for property/casualty insurers, underwriting results were weak.