Earnings and revenues for U.S. insurance brokers are likely to improve modestly in 2016 in relation to levels reported through nine months of 2015, according to Fitch Ratings' 2016 U.S. Insurance Broker Outlook report, which was released today.

Fitch expects near-term operating performance and balance sheet strength to remain supportive of a stable credit ratings outlook for the brokers in the company’s ratings universe.

The New York-based ratings agency said it sees limited potential for rating changes over the next 12 to 18 months, despite anticipating modest improvement in some credit fundamentals in 2016. Willis Group Holdings PLC, which is on Rating Watch Positive because of the proposed merger with Towers Watson & Co., is an exception. Fitch said that the merger faces closing uncertainty tied to gaining Towers Watson shareholder approval.

The sector outlook is stable as debt-servicing capabilities are expected to remain steady, Fitch said. A soft reinsurance market with flat or declining premium rate changes in primary commercial insurance segments will put pressure on brokers' organic growth and profit margins in 2016. However, global brokers' revenues from diverse geographic areas and products, including healthcare and benefits consulting, should help offset this. Strong retention and insured exposure growth from a slowly improving economic environment will also promote revenue expansion, Fitch said.

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