Insurance buyers face a challenging environment for the remainder of 2022 as insurers push for further rate increases, top executive Arthur J. Gallagher & Co said Thursday.
Rising claims costs, inflation, increased frequency and severity of catastrophic claims, increased payouts and legal settlements, low investment returns and higher reinsurance costs are forcing underwriters to rethink pricing, said J. Patrick Gallagher Jr., president, president and CEO of the brokerage. , during a call with analysts to discuss the brokerage’s fourth quarter results.
“I think the carriers will continue to pressure pricing and don’t see a dramatic change in the near term,” he said.
Even workers’ compensation rates, which had been flat as other rates rose in recent years, are rising, Gallagher said.
Other lines are still experiencing strong increases. “Professional liability is exploding; cyber is nearly unbreakable,” he said.
Gallagher reported total revenue of $1.97 billion for the fourth quarter of 2021, an increase of 15.8% over the same period a year earlier.
Its core brokerage unit recorded revenue of $1.47 billion for the quarter, an increase of 18.7% over the 2020 period. Brokerage revenue increased 10.6% on an organic basis , which excludes the effect of acquisitions and exchange rate fluctuations.
Gallagher completed 19 brokerage acquisitions during the fourth quarter with annualized revenue of $821.1 million, which includes its December 1 acquisition of the treaty reinsurance business of Willis Towers Watson PLC.
Gallagher’s retail P&C business saw a 13% increase in organic revenue in the quarter, and its wholesale business saw organic growth of 15%.
Its risk management division, which includes its third-party administration business, reported revenue of $254.3 million, a 17.5% increase over the prior year period and an increase of 13.1% on an organic basis.
The company reported net income of $120.9 million for the quarter, down 21% from the same period in 2020, as compensation, operating expenses, acquisition fees and other expenses increased.
For the full year 2021, Gallagher reported total revenue of $8.21 billion, an increase of 17.2% over 2020. Net profit increased by 11.3% to reach $955 million.
