Rates are mostly holding firm with the exception of professional lines, while capacity is under pressure in catastrophe-prone states, said Brown & Brown Inc.’s chief executive officer.
Inflation remains the main challenge as costs outpace revenue, specifically as it relates to the purchase of insurance, J. Powell Brown, president and CEO, said in a conference call. Buyers “are exhausted by the levels of rate increases,” mainly for property, that have occurred over several years, he said.
From an economic view, Brown said consumers continue to spend and drive demand, keeping the economy resilient even with higher interest rates as growth and inflation continue to moderate. He said business leaders continued to hire but remain cautious about making large investments.
Insurance purchases remain a challenge for customers related to their overall spending. Many customers have increased their deductibles and cut their limits, he said.
Rate increases were somewhat consistent across most lines in the first half of 2023, with admitted markets up 5% to 10% and excess and surplus markets up 10% to 25%.
The two most significant exceptions are workers’ compensation and professional liability for larger companies, both of which saw rate declines. Workers’ comp rates fell less than in previous quarters, and were flat to down 5%, Brown said.
Professional liability rates including public company, errors and omissions and cyber were flat to down 15%, and in some cases down further than that, Brown said.
Catastrophe-exposed property coverage remains the most-challenging line as insurers are in general not increasing their capacity, according to Brown. Underwriters are pushing for higher insured values due to inflation-induced replacement costs, he said.
Placements for personal lines in California, Florida and Texas remain difficult as policies continue to move into state-sponsored plans or excess and surplus, he said.
Brown said the company closed on its acquisition of Kentro Capital Ltd., which was folded into the operations of Brown & Brown Europe. Kentro operates managing general underwriters in the United Kingdom, United States, Europe and other locations and has a retail broker operation in both the United Kingdom and Europe, Brown said.
He said Kentro has significant focus in financial lines, aviation and trade credit in addition to other lines.
In the overall mergers and acquisitions market, the level of deals mainly from financial backers continued to slow in the third quarter with fewer bidders for businesses, Brown said.
Brown & Brown completed seven other acquisitions with estimated annual revenue of $14 million in the quarter and completed 20 this year, Brown said.
Third-quarter net income rose to $175.9 million from $161.1 million. Total revenue rose to $1.07 billion from $927.6 million.
The retail segment saw organic growth of 8% with strong new business, good retention and rate increases both domestically and internationally, Brown said.
The program segment posted organic growth of 12% as rates continued to increase, especially in catastrophe property business, Brown said
For wholesale brokerage, organic growth rose over 13% on domestic and international new business and rate increases for most lines, according to Brown.
The brokerage delegated authority and personal lines businesses did well, while professional liability continued to be under pressure due to a decline in rates, he said.
Brown & Brown Inc. is the seventh-largest global insurance broker with $3.6 billion in 2022 revenue, according to the annual Best’s Review ranking.