P&C insurance premiums continue to exhibit increases as high as 10 percent on some risks, as reinsurance rate-softening on property will not pass through to the rest of the market immediately, says the CEO of insurance broker Brown & Brown.
Today during the company’s second-quarter earnings conference call, President and CEO J. Powell Brown says primary market carriers are reluctant to pass along the bulk of reinsurance decreases immediately as they wait for the outcome of this year’s hurricane season. If this season does not produce a major wind event ,then the first to feel that outcome could be the excess and surplus lines market--translating into flat or declining rates starting in January of next year.
“That’s not a negative for Brown & Brown,” says the CEO. “We can still grow when we are doing that. The answer is that it creates a lot of opportunities for us to do a good job not only for our existing clients, but for new clients we don’t already have.”
“It is not just the reinsurance issue that is going to moderate rates further,” says Brown adding that the other competing factors are competition and surplus capital in the marketplace.
In his general observation of the insurance markets, Brown says rates in most lines of business are flat to up as high as 10 percent. The more difficult business continues to be workers’ compensation and commercial auto in some states. The only risks he mentioned that are experiencing any rate decrease are large coastal accounts.
“All carriers want rate, but the competitive pressures are moderating those rates more today than in Q1. Regional [insurers] continue to be very aggressive,” says Brown.
Turning to the firm’s earnings, second-quarter net income rose 22 percent to $52 million. Revenues increased 12 percent to $326 million in the quarter, with organic growth of more than 7 percent. For the first six months of this year, net income is up 22 percent to more than $112 million and revenues are up 11 percent to $661 million.
Brown says the company’s acquisition pipeline remains “good” and the firm is aggressively seeking new business. All four divisions of the firm contributed positively to the results, he adds.
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