Prospects for revenue growth for U.S. insurance brokers in 2012 will likely match or exceed levels reported for the first nine months of 2011. Nevertheless, the competitive fundamentals of the property/casualty insurance market and tepid pace of the global economic recovery will continue to challenge more meaningful improvement in operating performance, Fitch Ratings said Thursday.

The first nine months of 2011 saw average operating earnings rise modestly for the five publicly traded brokers due almost entirely to higher operating earnings at Aon Corp. (AON) as a result of the synergy captured from its acquisition of Hewitt Associates and at Marsh & McLennan Companies Inc. (MMC).

Aon reported operating income of $1.2 billion for the nine months ended Sept. 30, a 46 percent jump from $804 million in the year-ago-period. Aon expects cumulative annual expense savings of $355 million to be fully realized by the end of 2013.

Meanwhile, MMC reported operating income of $1.2 billion for the first nine months of 2011, which doubled the $614 million recorded for the same period in the prior year.

Willis Group Holdings PLC's (WSH) results were negatively affected by its debt repurchases expenses. The company also incurred a $130 million pretax charge related to its previously announced 2011 operational review.

The remaining two companies, Arthur J. Gallagher & Co. (AJG) and Brown & Brown Inc. (BRO), each saw operating income essentially unchanged.

Looking forward, despite potential top-line gains from pricing increases that will benefit commission-based brokerage revenues over the next 12 months, Fitch expects earnings growth will be muted for most companies as further expense cuts will be difficult to realize.

"Through October 2011, the number of agency and brokerage acquisitions roughly equaled the number of transactions in all of 2010, and easily surpassed the number of deals in 2009 during the recession," Fitch analyst Gregory Dickerson wrote in the report.

Fitch attributes this favorable trend to a more optimistic economic environment following the recession, a more reasonable cost of both debt and equity to fund purchases, and modestly improved valuations for sellers.

Moving into 2012, Fitch expects overall revenue growth to continue being driven by mergers and acquisitions, as a ready supply of smaller firms can provide a source of new revenue for larger firms.

One factor that may provide independent broker owners to sell in the near term is the pending change in capital gains tax rates, which are expected to rise to 20 percent from 15 percent in 2013 when the current rate is scheduled to sunset.

Shares of all five insurance brokers closed lower in Thursday's trading, as investors fled risky assets in reaction to bearish comments by the European Central Bank President, Mario Daghi.