Agent/broker organic growth drops in Q1 2015

Large and mid-size private agencies and brokerage firms reported a lower median organic growth this quarter than the one previously.

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Large and mid-size private agencies and brokerage firms experienced a slight drop in median organic growth during the first quarter of 2015, from 6.2% to 5.8%, according to the latest Reagan Consulting Organic Growth and Profitability (OGP) survey.

The consulting firm, which regularly reports growth in the agent/broker sector, reported that all lines grew at a slower pace during Q1 than during the same period a year previously. Commercial lines was especially lagging, with a growth rate of 6.6% this year versus 8.4% during Q1 2014.

Other results of survey of 130 agencies and brokerages include:
  • Benefits growth, at 4.5 percent, slipped from the 5.0 percent growth rate of Q1 2014.
  • Personal lines growth slipped to 1.3 percent versus 2.8 percent in Q1 2014.
  • Agents and brokers project a 6.0 percent organic growth rate for 2015.
Reagan Consulting President Kevin Stipe attributes the slowing growth to the softening insurance market and an inconsistent US economy.

“But growth is holding relatively strong despite the decline in pricing,” said Stipe, who pointed out that rates declined by 2.3% in the first quarter, according to a Council of Insurance Agents and Brokers commercial P/C survey.

“This signals the industry has moved from flat pricing to true softening.”

Even with the decline, Reagan Consulting noted that margins continue to be strong. Contingent income grew at 6.6% for the median firm in the first quarter – less than half of the 15% growth of 2014’s first quarter.

The survey results come on the heels of another Reagan Consulting report, which noted that agency valuation multiples are at an all-time high – influenced heavily by the sector’s growth and profitability performance.

"The deal multiples being delivered have steadily increased in recent years. In fact, multiples have increased by roughly 8-10% over just the past 12 to 18 months," said Stipe. "These record multiples create opportunity for potential sellers; are a major nuisance for those desiring to remain independent; or are a source of frustration for buyers who struggle to get deals done or fail to get strong financial returns based on the valuation they must deliver."
 
 
 

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