The insurance brokerage sector remains financially solid despite the weak U.S. economy and soft commercial property and casualty insurance market, Moody's Investors Service said.

In its latest "Insurance Industry--Industry Scorecard" report, Moody's reviewed the credit rating of the three major publicly traded insurance brokers: Aon, Marsh & McLennan Companies Inc. and Willis Group Holdings. The report also examined eight privately held firms.

"While the economic downturn and lower pricing resulted in marginal or even negative organic growth for some insurance brokers in 2009, overall the industry was able to maintain profitability," Benjamin Goldberg, co-author of the report, said in a statement.

A valuable service offering, a high proportion of variable costs, and lack of underwriting or investment risk helped the industry remain profitable, though revenues declined from 2008 levels, Moody's said.

"Brokers responded to market challenges by cutting costs, exiting non-core operations, and in most cases slowing the pace of acquisitions," said Mr. Goldberg.

Consequently, operating margins were fairly stable, and fixed-charge coverage and financial leverage metrics improved modestly.

Moody's went on to say that since the top brokers were allowed to once again accept contingent commissions earlier this year, it has been viewed as credit positive for these brokers, providing the opportunity to reap incremental revenues and facilitating the acquisition of smaller brokers that already accept contingents.

"Mergers and acquisitions will remain a strategic focus for major insurance brokers given the fragmented nature of the industry, particularly in the [United States]," said Bruce Ballentine, co-author of the report.

With gradual improvement in the economy, insurers may see some organic revenue growth, as well as higher profit margins and better financial flexibility, Moody's added.

The report noted that revenues for the public brokers overshadow the privately held brokers--standing at more than $7 billion in 2009 compared to an average of $372 million for the privately held brokers.

Copies of the report are available by contacting Moody's at one of its offices found on the rating agency's website.