The current economic crisis does not bode well for insurance brokerage earnings, and one casualty of the fallout might be Arthur J. Gallagher, which could be a prime acquisition target, one analyst contends.
In an analyst's note, Meyer Shields with Stifel Nicolaus said the reduction in client payrolls due to the economic crisis is posing "a strong headwind to the insurance brokers' domestic revenues."
Massive layoffs across the country impacting virtually all industries directly affect many lines of business–especially workers' compensation, employment practices liability and employee benefits, he noted. Lower earnings can also impact the amount of coverage businesses buy, which by extension cuts into a broker's income.
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