WFG Analysts Say Insurance Brokers' Outlook Cloudy
NU Online News Service, April 19, 3:12 p.m. EDT?Leading insurance brokers, in the wake of the probes into fee improprieties, are reporting a continuing drop in revenues, according to research by WFG Capital Advisors LP, an investment banking firm for the insurance industry.[@@]
Steven Wevodau, managing principal of Harrisburg, Pa.-based WFG, said, "2004 results among the leading distributors contained in WFG's Broker Insights report support that industry leaders continue to show declines in organic revenue growth. In essence, the organic revenue growth composite is decreasing at an increasing rate."
WFG executives said brokers face a cloudy future impacted by tough competition, client scrutiny and slipping prices. Brokers, they added, are challenged to continue growth and replace the contingent fees that many have agreed to forego.
Mr. Wevodau noted, "The eight leading firms reported a composite 5 percent organic revenue decline for the quarter ending December 2004."
He said that if the benefits of acquisitions and foreign currency exchange fluctuations are removed, "organic revenue growth among the industry's leading firms continues to shrink their revenue base."
Mr. Wevodau noted that the brokerage segment posted an 8.4 percent increase in revenues for the same period in 2003.
He said product rate stabilization "continues to seriously impact the industry leaders. The overall direction of the market would strongly suggest that these firms are contending with increased competition, client scrutiny and market softening. When you combine all these factors, it only makes the outlook cloudier."
According to Rob Lieblein, president of WFG, "The recent settlements with various attorneys general would indicate that the market segment is aggressively seeking resolution of all regulatory impediments."
He continued, "As many firms resolve impending investigations and opt to forego contingent awards, the industry faces further challenges to replace lost revenues and to continue to demonstrate growth.
"2005 will present numerous challenges for the industry leaders, and our goal is to provide qualitative and quantitative insights among the peer group leaders. Clearly, the [New York Attorney General Eliot] Spitzer [client repayment] settlements with Marsh and Aon serve as critical catalysts for many industry leaders to look upon."
WFG said a report on the situation is included in the March 2005 edition of Broker Insights. The report can be obtained at the WFG Web site, www.wfgca.com, by selecting the "Publications" link, or by contacting WFG at (717) 780-7800.
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