By: Business Insurance
Posted: February 9, 2016
Broker revenue growth hits speed bump
Agent-broker organic revenue growth slowed to 4.6% in 2015, according to Reagan Consulting Inc.’s Organic Growth and Profitability survey, released Tuesday.
According to Atlanta-based Reagan Consulting, organic growth reached 6.2% each year from 2012 to 2014. The survey also found that agent-broker profit margins declined to 20.1% a year after reaching record profitability in 2014. That median profitability, measured by EBITDA — earnings before interest, taxes, depreciation and amortization — was 21%.
“The results show a downward tick,” said Reagan Consulting President Kevin Stipe in a statement accompanying the survey results. “But they are still fairly solid from a historical perspective.”
“In the past eight years of the OGP survey, the organic growth rate of 4.6% ranks fourth best, while the EBITDA margin of 20.1% ranks second best,” he said in the statement.
According to the study, the pace of growth slowed in all three major lines of business — commercial property/casualty, personal property/casualty and employee benefits. According to Reagan Consulting, three key factors affected both growth and profitability: a soft market for commercial property/casualty premiums, continued slow growth in the U.S. economy of only 2.4%, and a sharp decline in crude oil prices.
Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from approximately 140 midsize and large agencies and brokerage firms. Reagan Consulting said that about half of the industry’s 100 largest firms participated in the most recent survey.