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Primary insurance rates will likely increase further in 2023 as the effect of higher year-end reinsurance costs filter through to commercial retail insurance buyers, especially on property risks, Arthur J. Gallagher & Co.’s top executive said Thursday.
Speaking on a call with analysts to discuss the brokerage’s fourth-quarter 2022 results, J. Patrick Gallagher Jr., chairman, president and CEO of Gallagher, said primary insurers face a range of pressures in 2023.
“Challenging reinsurance market conditions will no doubt put pricing pressure on the primary market during 2023. And that’s on top of our primary carrier partners dealing with catastrophe losses and secondary perils, including convective storms, floods and wildfires,” he said.
Property insurance rates could get a lot firmer, Mr. Gallagher said.
Looking at fourth-quarter price increases, overall global renewal premiums, which includes rates and exposure increases, were up 9%, he said.
Gallagher reported $1.99 billion in brokerage and claims management-related revenue for the quarter, up 15.9% compared with the same period in 2021, and up 11.7% on an organic basis.
Its core brokerage operations reported revenue of $1.7 billion for the quarter, up 16.1%. Risk management, which includes its claims administration business, increased 14.3% to $289.7 million.
Looking at its main broking business segments, U.S. retail reported 8% organic growth, wholesale was up 9%, U.K. operations were up 17%, Australia and New Zealand up 12% and Canada up 9%, Mr. Gallagher said.
Including its corporate segment, which includes its investments in clean coal, Gallagher reported $2 billion in revenue, up 2.8%. Net income increased to $135.5 million for the quarter, up 12.1%.
Gallagher completed 17 “tuck-in” mergers totaling more than $141.3 million in annual revenue during the quarter and 36 deals for the full year with $244 million in revenue, Mr. Gallagher said.
For the full year, Gallagher reported $8.4 billion in brokerage and claims administration revenue, up 21.1%. Its brokerage sector reported 9.7% organic growth. The full company reported revenue of $8.42 billion, up 4.3%. Profit increased 16.9% to $1.12 billion.