Organic growth falls for independent agencies in Q3

The third quarter ended in a sizeable decrease in organic growth for agents and brokers, but they remain positive.

Insurance News

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After a successful 2013, median organic growth for independent insurance agents and brokers is down in the third quarter, dipping to a rate of 6.0% from 6.8% in the same period last year.

Those are the findings from Atlanta-based Reagan Consulting Inc., which has surveyed large and mid-size agencies and brokerage firms quarterly since 2008.

Despite the dip, however, the pace of growth represents a moderate improvement over the 5.8% rate from the second quarter of 2014. Similarly, privately held brokers are outstripping their publicly held counterparts, which grew just 4.1% in the same period.

As such, Reagan Consulting President Kevin Stipe noted that “brokers are still pretty optimistic.”

“A 6% or 7% growth year is a pretty good year for the brokerage business, and with profits going up over the prior year, they’re doing pretty well,” Stipe told Insurance Business America. “This is generally good news, just a little less so than it was last year.”

Survey participants also believe agents and brokers will still meet their projected 2014 organic growth rate of 7.0%, which would account for the highest level of growth in the survey’s seven-year history.

“We hope their optimism proves to be well-founded,” Stipe said.

He attributes the slight dip in Q3 to relatively static and slightly decelerating rates in commercial property/casualty lines, as tracked by the Council of Insurance Agents and Brokers.

Other findings include a median profit margin increase of 22.4% in the third quarter from 22.1% in the same period last year.

Reagan Consulting noted that these margins typically decline in the fourth quarter as contingent income “is booked on a cash basis and thus inflates profit margins before the fourth quarter.”

Nevertheless, brokers are still projecting their fourth-quarter margins will break 20% for the first time since the firm began tracking such metrics in 2008.
 

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