Reagan: Organic Growth, Profitability Increased for Privately Held Brokers in 2011

In spite of continuing soft market conditions, both median organic growth and EBITDA for privately held insurance agents and brokers were up slightly from 2010; median organic growth totaled 3.7 percent and median EBITDA profitability was 18.2 percent, according to Reagan Consulting's 2011 year-end Organic Growth and Profitability Survey (OGP Survey), released today. 130 agencies participated in the year-end 2011 survey.

“Sixteen of the last 20 years have been soft market years in the P&C arena,” said Tom Doran, senior vice president of Reagan Consulting. “Positive organic growth in this environment has been very difficult to achieve. Any positive growth results are welcome news.”

The OGP Survey, now in its fourth year, is a real-time indicator of quarterly growth and profitability results for privately held insurance agents and brokers. With both organic growth and profitability showing improvement over 2010 results, 2011 was a significantly better year for the industry.

“These 2011 results indicate that we have likely seen the worst of the perfect storm of soft P&C rates and a lackluster economy that has dogged our industry for the past several years. While we are by no means out of the woods yet, these results confirm we are heading in the right direction,” Doran said. “Most of our OGP Survey participants believe that 2012 will be an even better year than 2011.”

Key findings include:

• Median organic growth for brokers in the OGP Survey totaled 3.7 percent, almost double 2010's results. Median EBITDA profitability totaled 18.2 percent, up slightly from 2010.   

• Contingent income, a significant driver of agency profitability, was up 2.7 percent in 2011. 

• Median commercial lines property-casualty organic growth totaled 3.3 percent in 2011, a significant improvement over the flat results of 2010 and the negative growth achieved in recent years. 

• Although a great deal of uncertainty remains over how healthcare reform will impact group benefits business in the future, median group benefits growth in 2011 totaled 7.1 percent, up significantly from 2010, when it grew by only 4.4 perent. Median EBITDA profitability for group benefits business totaled 22 percent.
• Organic growth in personal lines P&C business, which totaled only 1.3 percent for the median broker, was slightly lower than last year. This business did, however, continued to deliver impressive EBITDA profit margins (31.2 percent).

• Reagan's “Rule of 20,” an excellent indicator of overall agency health that appropriately weighs both growth and profitability results, continued to improve sharply for the median OGP participant in 2011. The Rule of 20, which is calculated by adding an agency's organic growth rate to one-half of its EBITDA profit margin, totaled 12.9 for the median OGP participant, an improvement of almost 22 percent versus 2010. 

For more information about participating in the OGP Survey, contact Shirley Lukens at 404-233-5545, or Shirley@reaganconsulting.com.