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No sign firm P&C rate conditions will change: Gallagher

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There is no indication the firm property-casualty environment, in which rates are up in nearly all lines and geographies around the globe, will change anytime soon, the head of US broker Gallagher says.

Reporting a 7% increase in net earnings during the first quarter, Chairman, President and CEO J. Patrick Gallagher says the business is “off to an excellent start in 2021”.

“We are operating in a firm property casualty environment … which is consistent with the past few quarters,” he said. “We don’t see conditions that would indicate this rate environment would change anytime soon.”

Gallagher has recorded higher earnings as hardening rates cushion it from the economic disruption of COVID-19.

The brokerage division recorded net earnings in the first quarter of $US364.4 million ($472.29 million).

In the first quarter, customer retention and new business generation remained similar to pre-pandemic levels while renewal exposure units - insured values, payrolls, employees, miles driven and so on - were lower than the pre-pandemic year-ago levels but higher than the last three quarters of 2020.

Premium rates across most geographies and lines of coverage continued to increase, mitigating exposure unit declines, and mid-term policy modifications - including cancellations - were a net positive, similar to first quarter 2020.

“Thus far in second quarter 2021, property & casualty new business, retentions and mid-term policy modifications are trending similar to first quarter 2021 and much improved compared to lows seen in April and May 2020, as our customers’ businesses continue to recover and economic activity increases,” Gallagher said.

So far during the second quarter of 2021, Gallagher says overall property/casualty premium rates have moved higher and exposure units also trended higher than first quarter 2021.

“So far during second quarter 2021, we are seeing new claims arising similar to first quarter 2021, which is a substantial increase compared to lows seen in April and May 2020,” it says.

Gallagher says the vast majority of its employees continue to work remotely for some or all of their work week. There have been around 450 confirmed COVID cases among its 34,000 employees, contracted outside its office locations.

Gallagher is managing costs by limiting discretionary spending such as travel, entertainment and advertising expenses, adjusting its real estate footprint, reducing capital expenditures, and limiting use of outside labour and consultants, saving around $US64 million ($82.95 million) in the first quarter compared to a year earlier.