IBA Southeast: Reagan Consulting reports downward trend in agent-broker revenue

Tepid pricing is seen as the “primary culprit” for the slowdown with a gloomy outlook ahead

Insurance News

By Allie Sanchez

Atlanta-based Reagan Consulting has reported the results of its most recent Organic Growth and Profitability survey.

The survey revealed that agent-broker organic revenue growth slid 3.6% on average, reaching its lowest level in five years, the company said in a statement. 

“After beginning the year with a slight uptick, organic growth declined in both the second and third quarters and seems poised to drop further in the fourth quarter,” observed Kevin Stipe, Reagan Consulting president.

Reagan, a management consulting and merger-and-acquisition advisory firm focused on the insurance distribution system, noted that tepid pricing in commercial lines is the “primary culprit” for the decline. Based on the confidential submissions of the 140 mid-sized and large agencies and brokerage firms, organic revenue growth in commercial lines slowed to 3%.

On average, profit margins before adjustments slid to 21%, taking into consideration that third quarter margins are usually higher than year-end margins due to contingent income.

Reagan forecasts margins to fall below the 20% level for the first time since 2013. 

“Weakened organic growth and heavy resource investments have taken their toll on earnings,” Stipe added. He also said that 2016 could be another year of lower profitability following a dip last year on the back of a consistent run of healthy reported margins from agencies and brokers.
 

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