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NU Online News Service, April 21, 3:33 p.m. EDT
Despite a premium price increase push by insurers, rates remain competitive, especially for new accounts with good risk profiles, the chief executive of Brown & Brown said as the firm reported a 7 percent first-quarter decrease in net income.
During a financial analyst’s conference call today, J. Hyatt Brown, chief executive officer of the insurance brokerage firm, said, “Everyone talks about how things are going to change next week or next month, but we think it probably won’t be until 2010 before that happens.”
He said there is a second part to rate increases in this current economic environment and that is what buyers’ reaction will be in response to a premium increase. Mr. Brown said he expects they will buy less insurance.
“There’s only a certain amount of dollars that they can afford to spend,” he said. “Rate increase does not mean there will be a robust increase in the brokerage revenues.”
J. Powell Brown, president of Brown & Brown described an insurance environment nationally that continued to see premium rates that are flat to down. He described very few lines that exhibited any signs of premium increases anywhere throughout the country.
Jim W. Henderson, vice chairman and chief operating officer, discussing the wholesale market said that coastal risks or those risks that have experienced losses are witnessing some increases, but for most other accounts rates remain competitive.
In response to a question about Citizens, Florida’s state-sponsored insurer of last resort, Hyatt Brown said there are several bills working their way through the state legislature to deal with funding the insurance program.
Ultimately, he said, legislators are coming to the reality that rates will have to be allowed to rise in order to deal with the program’s exposure to catastrophe. They could allow for those increases sometime in 2010, he estimated.
Regarding the broker’s financial performance so far this year, the Daytona Beach, Fla.-based insurance broker reported net income dropped 7 percent, or $3.7 million, from the same period last year.
Net income dropped from $52 million, or 37 cents a share, to $48 million, or 34 cents a share. Revenues during the period increased 3 percent, or $7 million, from $257 million to $264 million.
Much of the revenue increase was helped by acquisition, as organic growth came in at negative 2.2 percent. Commission and fees for the quarter rose 4 percent, or $10 million, to $264 million.