NU Online News Service, Dec. 9, 2:12 p.m. EST

Property and casualty insurance brokers received a continued stable outlook from Fitch Ratings, as revenue and earnings growth next year is expected to match or exceed levels for the first nine months of this year.

In a five-page report reviewing five publicly traded national insurance-brokerage firms, Fitch says that despite premium gains aiding top-line growth, brokers’ revenues are expected to be “modest due to a flat rate environment” in the commercial-insurance market.

The shrinking supply of acquisition targets “of a size that would significantly augment the acquirers’ total revenue streams” is expected to dampen non-organic growth, says Fitch.

In the rating service’s review of the insurance brokers Aon, Arthur J. Gallagher, Brown & Brown, Marsh & McLennan, and Willis, average operating income increased for the group to over $600 million in the first nine months of 2011 from less than $600 million during the same period in 2010.

The increase, Fitch says, was primarily on the strength on higher earnings at MMC and at Aon from its acquisition of Hewitt Associates.

Willis’ results were negatively affected by debt repurchase expenses and its 2011 operational review, which led to a $130 million charge.

For AJG and Brown & Brown, operating income was essentially unchanged.

Acquisition activity increased, Fitch says, with the number of transactions through October 2011 equaling all of 2010 and surpassing all of 2009.

“Fitch expects overall revenue growth to continue to be driven by mergers and acquisitions, as a ready supply of smaller firms can provide a source of new revenue for larger firms,” says Fitch.

A pending change in the capital-gains tax rate for 2013 could compel agencies to do more deals next year, Fitch says.