Primary insurance prices are likely to rise further in 2023 as the impact of higher year-end reinsurance costs filters through to commercial retail insurance buyers, particularly on property risks, Arthur J. Gallagher & Co’s top executive said on Thursday.
On a call with analysts to discuss the brokerage’s fourth-quarter 2022 results, J. Patrick Gallagher Jr., chairman, president and CEO of Gallagher, said primary insurers face a variety of pressures in 2023.
“Challenging conditions in the reinsurance market will undoubtedly put pricing pressure on the primary market in 2023. And that’s in addition to our primary carrier partners handling catastrophe losses and secondary perils, including convective storms, floods and wildfires,”; he said.
Property insurance rates can be much firmer, Mr. Gallagher said.
Looking at rate increases in the fourth quarter, total global renewal premiums, which include interest and exposure increases, were up 9%, he said.
Gallagher reported $1.99 billion in brokerage and claims-related revenue for the quarter, up 15.9% compared to the same period in 2021, and up 11.7% on an organic basis.
Its core brokerage business reported revenue of $1.7 billion for the quarter, up 16.1%. Risk management, which includes its claims administration business, increased 14.3% to $289.7 million.
Looking at its main brokerage business, US retail reported 8% organic growth, wholesale was up 9%, UK operations were up 17%, Australia and New Zealand up 12% and Canada up 9%, Gallagher said.
Including the corporate segment, which includes its investments in clean coal, Gallagher reported $2 billion in revenue, up 2.8%. Net income increased to $135.5 million for the quarter, an increase of 12.1%.
Gallagher completed 17 “tuck-in” mergers totaling more than $141.3 million in annual revenue during the quarter and 36 deals for the full year totaling $244 million in revenue, Gallagher said.
For the full year, Gallagher reported $8.4 billion in brokerage and claims management revenue, up 21.1%. Its brokerage sector reported 9.7% organic growth. The entire company reported revenue of $8.42 billion, up 4.3%. Profit rose 16.9% to $1.12 billion.