Brokers earn strong Fitch rating

By BenefitsPro


By Kathryn Mayer

Brokers may have some good — or at least better — news next year.

Revenue and earnings growth for brokers in 2014 is expected to improve modestly over 2013, according to a new report by Fitch Ratings.

The credit rating agency issued a stable rating outlook and positive sector outlook for the insurance broker market.

The report names the rebounding economy, pricing improvement, and “a rapidly evolving health care environment” as reasons for the slightly improved outlook.

Fitch said the stable ratings outlook reflects the “expectation that prospective operating performance and balance sheet strength will remain supportive of the existing ratings for the brokers in Fitch’s ratings universe.” But despite anticipating modest improvement in key credit fundamentals in 2014, Fitch said it sees limited potential for upgrades over the next 12 to 24 months.

Fitch said its positive sector outlook recognizes that the “continued but moderating trend of pricing improvement” in many commercial insurance business classes should provide a tailwind for organic growth at least through the first half of 2014.

Brokers can benefit from both the rebounding economy and from changes in the health care environment, namely the Patient Protection and Affordable Care Act, analysts said.

“New business opportunities should also benefit from continued economic improvement that will likely yield modest gains in insured exposures,” Fitch analysts said.

The health reform law and its subsequent problems can be beneficial for benefits experts who help employers and employees navigate all the changes.

“The disruption caused by the rapidly evolving healthcare environment should be especially beneficial for the employee benefits and consulting businesses of the insurance brokers.”

The ratings are a far cry from recent announcements of negative outlooks for carriers due to recent administration moves including allowing individuals to remain enrolled in non-PPACA-compliant policies for 2014, extending deadlines for 2014 enrollment; and changing the 2015 open enrollment period.

Both Fitch and Moody’s Investor Service said PPACA moves are negatively impacting carriers.

Originally published on BenefitsPro.com