All revenue lines saw"significant growth" in Q2 2018, Reagan Consulting reports. (Photo:Shutterstock)

Reagan Consulting has released the results of itsquarterly Organic Growth and Profitability (OGP) survey ofindependent insurance agents and brokers. The study found that theindustry's organic growth for the first quarter (Q1) of 2018 was5.6% and has risen to 6.1% through Q2.

Reagan analysts say organic growth for 2018 remains on target toreach levels not seen since 2014 when the insurance industry lastsaw two consecutive quarters of organic growth at or above6.0%.

(Source: Reagan ConsultingOrganic Growth and Profitability Survey)

Study identifies significant growth in Q2

The study results show the top performer of 2018continues to be group benefits, at 6.3% growth in Q2 2018. Commercial lines increased5.2%, versus 3.9% in Q2 2017, and personal lines increased 4.6%,versus 2.3% in Q2 2017, representing "significantly highgrowth," according to a statement from Kevin Stipe,president of Reagan Consulting.

In addition, the industry's Sales Velocity so far this year is"slightly above historical levels," said Stipe, addingthat Sales Velocity "is among the most important drivers of organicgrowth." Reagan figures show median Sales Velocity was 13.9% forthe industry through Q2 2018.

Sales Velocity is a proprietary Reagan metric used to benchmarkan agency's new business results against other firms. It isexpressed as a percentage and calculated by dividing a firm's newbusiness written in the current year by the prior year'scommissions and fees.

Related: IVANS Q2 results: Workers' comp only line withnegative rate change

Reagan Consulting uses a "Rule of 20″ scoreto benchmark trends in shareholder returns. It iscalculated by adding half of an agency's earnings before interest,taxes, depreciation and amortization (EBITDA) margin to its organicrevenue growth rate. An outcome of 20 or higher means a firm likelyis generating a shareholder return of about 15% to 17%, which is atypical return under normal market conditions.

For the Q2 report, Reagan analysts calculated a score of 17.8for all reporting firms, up from 14.3 in 2017.

Despite evidence of growth across multiple categories, EBITDAmargins dropped by almost 2 points, from 24.6% in Q2 2017 to 22.7%in Q2 2018. Stipe explained that the decrease appears tobe related to contingent income.

Since contingent income is relatively flat year-over-year,profit margins are under pressure, according to Stipe. He addedthat year-to-date profitability numbers are inflated by cash-basiscontingent income recorded during the first half of the year, somargins typically come down in the second half of the year.

For further information and commentary, contact KevinStipe of Reagan Consulting at [email protected].

Related: New report details economic growth and expectationsfor 2018