The 2014 Best Practices study from the IndependentInsurance Agents & Brokers of America (IIABA or the Big “I”)revealed slowed revenue growth rates and an increase inprofitability in some of the study’s six revenue groups.

“The results of this year’s Best Practices Study furtherdemonstrate the stability of the independent agency system despitesome challenges,” says Madelyn Flannagan, Big “I” vice president ofagent development, research and education. “Most study participantshave either grown their business or remained consistent. Theindustry is also continuing to invest more in staff andtechnology.”

While last year’s study revealed the highest organic growthrates since 2008, this year’s study shows a different picture, withonly one study group achieving an increase growth rate of at leastone percentage point ($1.25-5 million). Growth rates, in general,remained in the high single digits, with two study groups ($1.25 to5 and $10 to 25 million) achieving double-digit growth rates.

Pro-forma profit margins, indicating the actual profitability ofan agency if non-reoccurring/extraordinary expenses and revenue andexcessive owner compensation and perks are normalized, were strongbut stagnant, according to the study. While revenue growth ratesslowed, profit margins were (and will be) under increased pressure,and may result in either no growth or negative growth in the comingyear. Operating profit margins, however, grew slightly. BestPractices Agencies focused on becoming less dependent on P&Ccontingent and life/health bonus income, which has historicallycontributed significantly to an agency’s profit margins, byreducing expenses, becoming more efficient and finding othersources of revenue. As a result, the operating profits continued toimprove.

“The 2014 results indicate that Best Practices agenciescontinue to grow and build their businesses, and increaseprofitability, the key components of agency value,” says RobertRusbuldt, Big “I” president & CEO. “We are pleased, but notsurprised, that the independent insurance agency system remainsstable and strong.”

Every three years, the Big “I” collaborates with ReaganConsulting to select “Best Practices” firms throughout the nationfor outstanding management and financial achievement in six revenuecategories (less than $1,250,000; $1,250,000 to $2,500,000;$2,500,000 to $5,000,000; $5,000,000 to $10,000,000; $10,000,000 to$25,000,000; and more than $25,000,000). Agencies are nominated byeither a Big “I”-affiliated state association or an insurancecompany and qualified based on operational excellence.