Industry Trends

Reagan Consulting: Agent/Broker Organic Growth & Profitability Slip in Q3 2015

Survey Measures Large & Mid-Size Private Agencies & Brokerage Firms

Independent insurance agents/brokers posted median organic growth of 4.4 percent for the third quarter of 2015, compared with 6.0 percent recorded in the third quarter of 2014, as measured by the Reagan Consulting Organic Growth and Profitability (OGP) quarterly survey.

Profitability is coming down too, noted Reagan Consulting: 21.9 percent in Q3 2015 compared with 22.4 percent in Q3 2014 as measured by EBITDA (earnings before interest, taxes, depreciation and amortization).

The third-quarter results marked the slowest growth rate since late 2011, Reagan Consulting noted. It’s the first time in 14 quarters that broker growth rates dipped below 5 percent.

“Agent/broker organic growth is slowing – for privately-owned and public brokers – because commercial property-casualty insurance rates are officially in a soft market, ” explained Kevin Stipe, president of Reagan Consulting, a management consulting and merger-and-acquisition advisory firm for the insurance distribution system. He added that p-c rates have softened for four consecutive quarters, as measured by the Council of Insurance Agents and Brokers.

“Profit margins tend to increase during times of strong organic growth and decrease when growth rates slow,” noted Stipe.

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