In light of a recent poll conducted by Reagan Consulting, the Organic Growth and Profitability survey reported that agent-broker organic revenue growth has fallen to 4% for the second quarter of 2016. This comes as a sharp decline from the 5.9% status in the second quarter of 2015.
The survey used confidential submissions from approximately 140 mid- and large-sized agencies and brokerage firms. Roughly half of the industry’s 100 largest firms participated.
“The powerful headwinds of soft commercial lines premium rates and a muddling economy are even stronger in 2016, after blowing for more than a year,” says Jim Campbell, principal of Reagan Consulting.
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To add to the reduction in agent-broker growth, profit margins declined to 23.1%, according to EBITDA, making it the lowest second quarter profit margins since 2012 and down from the 24.6% margin for the second quarter of 2015.
Reagan Consulting found that commercial lines organic revenue growth slowed to 3.1%, down from 5.1% in the first quarter of 2016. Employee benefit was the fastest-growing line of business, with organic growth of 6.2%, while personal lines grew at 1.7%.
Campbell says he is still holding out for a profitable year-end and he is projecting a margin of 20%. “If achieved, that would be generally consistent with the 20.1% margin achieved in 2015,” Campbell says.
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Merger-and-acquisition activity among agents and brokers, while not measured by the survey, is on track for the second most-active year on record. According to SNL Financial, data showed 207 announced deals in the second quarter of 2016, which Campbell noted 2015’s M&A transaction level exceeded the previous record year by more than 40%.
Median revenue of the firms completing the survey is approximately $18 million.
