For the second consecutive quarter, insurance agencies and brokerage firms recorded accelerating growth, a new report from Reagan Consulting details.

The first-quarter of 2018 saw the highest organic growth since 2015 across all lines of business. Researchers predict this trend will continue throughout the remaining second half of the year.

Overall, first-quarter agency organic growth reported by the firms participating in Reagan Consulting's Organic Growth and Profitability Survey rose to 5.6%, representing a 44% increase over Q1 2017 and a 24% increase over Q4 2017.

Q2 results by line of business

Researchers add that performance across all lines of revenue have exceeded expectations for the first half of the year. Brian McNeely, partner at Reagan Consulting, says personal lines provided the “biggest surprise” with the highest Q1 performance in the survey's history with 3.9%.

The group benefits category saw a 40% increase since the fourth-quarter of 2017 at 7.3%. Survey analysts attribute the growth to the continued escalation of healthcare costs and brokers' ongoing investment in additional producers and client-facing resources.

Looking ahead

Compared to overall growth, earnings before interest, taxes, depreciation and amortization (EBITDA) margin lowered slightly to 26.9% when compared to the 27.6% EBITDA margin reported in Q1 2017.

“Given the consistency of contingent income versus Q1 2017 combined with the organic growth increase, we would have expected the EBITDA margins to increase in Q1 of 2018,” McNeely said in a statement.

He also explains that the Q1 2018 operating profit was down 0.5% to 9.9%. Reagan Consulting analysts say they do not expect that pressure to lessen and predict EBITDA margins will fall slightly this year.

Reagan Consulting is a management consulting and merger-and-acquisition advisory firm for the insurance distribution system and has been conducting quarterly surveys of agency growth and profitability since 2008. R.C. conducts their surveys using confidential submissions from more than 150 midsize and large agencies and brokerage firms. Nearly half of the industry's 100 largest firms regularly participate in the survey.

For more information, visit Reagan Consulting's website.

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