![\"Agency](\"https:\/\/www.insurance-canada.ca\/wp-content\/uploads\/2019\/05\/Agency.png\")
<\/a><\/p>\nCommercial Lines Very Strong<\/strong><\/h4>\nHigher premiums and a growing U.S. economy appear to be the primary levers for Q1 growth in commercial lines, the Reagan survey found. The quarter\u2019s 3.2% GDP growth result, which also exceeded expectations, \u201cserved as a welcome turn-around from the 2.2% GDP growth result posted in Q4 2018,\u201d Doran says.<\/p>\n
Here\u2019s another encouraging trend, Doran adds: GDP for Q1 was the best start to a year since 2015. \u201cIf agents and brokers are not growing their commercial books of business in this environment, there\u2019s no blaming markets or the economy.\u201d<\/p>\n
Benefits Slowdown<\/strong><\/p>\nDoran called the respondents\u2019 responses on group benefits growth an \u201cunexpected and unwelcome outlier\u201d in an otherwise positive OGP report. Benefits grew by only 3.8% in the first quarter, roughly half the growth result posted in Q1 2018 (7.3%). \u201cThis disappointing first-quarter result was the lowest quarterly growth posted by benefits since early 2013,\u201d he said. \u201cIt is too early to tell if this growth slowdown is anything more than a bump in the road.\u201d<\/p>\n
Doran speculated on some reasons for the slow growth in group benefits:<\/p>\n
\n- The ongoing siege by private-equity investors on middle-market companies continues to result in attrition challenges.<\/li>\n
- More competitive (and potentially loss-leading) fee-based compensation approaches from national brokers on large and middle-market group benefits business continue to create retention challenges for independent agents and brokers.<\/li>\n
- Larger middle-market insurance clients increasingly are seeking relief from rising health insurance costs by exploring the use of HSAs, self-funded plans, high-value\/narrow network plans, and more \u2014 all of which put additional competitive pressures on premium growth and, in many cases, broker compensation.<\/li>\n<\/ul>\n
\u201cThe cyclical nature of our business yet again demonstrates the value of a diversified insurance brokerage that can deliver strong overall growth, even amid a downturn by one of the other core business units,\u201d Doran notes.<\/p>\n
Personal Lines \u2018Success Story\u2019<\/strong><\/h4>\nPersonal property\/casualty has been a real success story lately, Doran noted. \u201cHistorically, the personal lines modus operandi has been slow growth (flat to 2.5%) with high profit margins (mid-20s and higher). If done well, personal lines is a slow-growth cash cow.\u201d<\/p>\n
This changed in 2018, Doran adds, when personal lines managed to grow organically by 3.9%, the highest annual growth ever recorded in the OGP for this sector.<\/p>\n
\u201cDeliberate growth investments and a continued focus on high-end business by agents and brokers, when combined with rate, delivered the goods in a big way in 2018,\u201d Doran says. \u201cThe good times for personal lines continued into 2019, with a 3.0% growth rate in Q1, down a bit from last year\u2019s Q1 result (3.9%), but still above historical norms. Rate remains positive overall and a strong U.S. economy should allow for continued above-average growth in 2019.\u201d<\/p>\n
Profitability Improving Across the Board<\/strong><\/p>\nIn terms of profitability, the independent agency channel looks solid.<\/p>\n
\u201cProfitability results for the IA channel through the first quarter are always somewhat misleading, as p\/c contingent income, which falls straight to the bottom line as profit, is heavily weighted in the first half of the year,\u201d Doran notes. \u201cAgency profit margins are at their highest levels early in the year and then taper off as the year progresses. Even so, the year-over-year Q1 profitability data can illuminate some interesting trends.\u201d<\/p>\n
Through Q1, agency EBITDA profitability ticked up slightly, from 26.9% in Q1 2018 to 27.8%. This was likely driven in large part by much-improved supplemental income (i.e. contingencies and overrides) results year-to-date. In Q1 2018, supplemental income was down 2.5%.<\/p>\n
Through the first quarter of 2019, supplemental income is up 6.2%. \u201cNot to look a gift horse in the mouth, but these supplemental income results are somewhat surprising in light of the natural disasters and wildfires that plagued the nation in 2018,\u201d Doran observes.<\/p>\n
![\"EBITDA](\"https:\/\/www.insurance-canada.ca\/wp-content\/uploads\/2019\/05\/EBITDA.png\")
<\/a><\/p>\nBut the OGP study shows more good news on the profitability front. Marginal operating profitability (which excludes supplemental income) also was up nicely through the first quarter (11.6% versus 9.9% in Q1 2018). \u201cIf agents and brokers continue to drive these technological and operating efficiency improvements and year-to-date supplemental income results continue to trend positive, 2019 could be shaping up to be a very profitable year for the industry,\u201d Doran says.<\/p>\n
\u201cThe industry is as healthy it\u2019s been in recent memory,\u201d Doran concludes. \u201cThe massive M&A land grab and associated record valuations are nothing more than a confirmation of the incredible value of this distribution system. There may never have been a better time to be an independent insurance agent or broker.\u201d<\/p>\n
About the Survey<\/strong><\/p>\nReagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from nearly 200 midsize and large agencies and brokerage firms. Approximately half of the industry\u2019s 100 largest firms participated in this quarter\u2019s survey. The OGP survey is the industry\u2019s preeminent survey of midsize and large privately held brokers.<\/p>\n
Each participating agency receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan\u2019s quarterly commentary of industry trends affecting agents and brokers.<\/p>\n
For further information and commentary, contact Tom Doran at [email protected]<\/span><\/a>. For information on participating in the OGP survey, contact Michelle Appelbaum at [email protected]<\/span><\/a>.<\/p>\nAbout Reagan Consulting<\/b><\/p>\n
Reagan Consulting is a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm\u2019s services for insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, capital raise advisory, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Organic Growth & Profitability benchmark survey. For more information, visit ReaganConsulting.com<\/a>.<\/p>\nSource: Reagan Consulting
<\/i><\/p>\n
Tags: Brokers<\/a>, growth<\/a>, independent agents<\/a>, Reagan Consulting<\/a> Read the original article at Insurance-Canada.ca <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Group Benefits shows Q1 weakness: Reagan Consulting Atlanta, GA (May 17, 2019) \u2013 The new year is underway and organic growth remains solid among agents and brokers in the independent insurance channel. However, \u201csome...<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/14974"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=14974"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/14974\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=14974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=14974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=14974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
Doran called the respondents\u2019 responses on group benefits growth an \u201cunexpected and unwelcome outlier\u201d in an otherwise positive OGP report. Benefits grew by only 3.8% in the first quarter, roughly half the growth result posted in Q1 2018 (7.3%). \u201cThis disappointing first-quarter result was the lowest quarterly growth posted by benefits since early 2013,\u201d he said. \u201cIt is too early to tell if this growth slowdown is anything more than a bump in the road.\u201d<\/p>\n
Doran speculated on some reasons for the slow growth in group benefits:<\/p>\n
- \n
- The ongoing siege by private-equity investors on middle-market companies continues to result in attrition challenges.<\/li>\n
- More competitive (and potentially loss-leading) fee-based compensation approaches from national brokers on large and middle-market group benefits business continue to create retention challenges for independent agents and brokers.<\/li>\n
- Larger middle-market insurance clients increasingly are seeking relief from rising health insurance costs by exploring the use of HSAs, self-funded plans, high-value\/narrow network plans, and more \u2014 all of which put additional competitive pressures on premium growth and, in many cases, broker compensation.<\/li>\n<\/ul>\n
\u201cThe cyclical nature of our business yet again demonstrates the value of a diversified insurance brokerage that can deliver strong overall growth, even amid a downturn by one of the other core business units,\u201d Doran notes.<\/p>\n
Personal Lines \u2018Success Story\u2019<\/strong><\/h4>\n
Personal property\/casualty has been a real success story lately, Doran noted. \u201cHistorically, the personal lines modus operandi has been slow growth (flat to 2.5%) with high profit margins (mid-20s and higher). If done well, personal lines is a slow-growth cash cow.\u201d<\/p>\n
This changed in 2018, Doran adds, when personal lines managed to grow organically by 3.9%, the highest annual growth ever recorded in the OGP for this sector.<\/p>\n
\u201cDeliberate growth investments and a continued focus on high-end business by agents and brokers, when combined with rate, delivered the goods in a big way in 2018,\u201d Doran says. \u201cThe good times for personal lines continued into 2019, with a 3.0% growth rate in Q1, down a bit from last year\u2019s Q1 result (3.9%), but still above historical norms. Rate remains positive overall and a strong U.S. economy should allow for continued above-average growth in 2019.\u201d<\/p>\n
Profitability Improving Across the Board<\/strong><\/p>\n
In terms of profitability, the independent agency channel looks solid.<\/p>\n
\u201cProfitability results for the IA channel through the first quarter are always somewhat misleading, as p\/c contingent income, which falls straight to the bottom line as profit, is heavily weighted in the first half of the year,\u201d Doran notes. \u201cAgency profit margins are at their highest levels early in the year and then taper off as the year progresses. Even so, the year-over-year Q1 profitability data can illuminate some interesting trends.\u201d<\/p>\n
Through Q1, agency EBITDA profitability ticked up slightly, from 26.9% in Q1 2018 to 27.8%. This was likely driven in large part by much-improved supplemental income (i.e. contingencies and overrides) results year-to-date. In Q1 2018, supplemental income was down 2.5%.<\/p>\n
Through the first quarter of 2019, supplemental income is up 6.2%. \u201cNot to look a gift horse in the mouth, but these supplemental income results are somewhat surprising in light of the natural disasters and wildfires that plagued the nation in 2018,\u201d Doran observes.<\/p>\n
<\/a><\/p>\nBut the OGP study shows more good news on the profitability front. Marginal operating profitability (which excludes supplemental income) also was up nicely through the first quarter (11.6% versus 9.9% in Q1 2018). \u201cIf agents and brokers continue to drive these technological and operating efficiency improvements and year-to-date supplemental income results continue to trend positive, 2019 could be shaping up to be a very profitable year for the industry,\u201d Doran says.<\/p>\n
\u201cThe industry is as healthy it\u2019s been in recent memory,\u201d Doran concludes. \u201cThe massive M&A land grab and associated record valuations are nothing more than a confirmation of the incredible value of this distribution system. There may never have been a better time to be an independent insurance agent or broker.\u201d<\/p>\n
About the Survey<\/strong><\/p>\n
Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from nearly 200 midsize and large agencies and brokerage firms. Approximately half of the industry\u2019s 100 largest firms participated in this quarter\u2019s survey. The OGP survey is the industry\u2019s preeminent survey of midsize and large privately held brokers.<\/p>\n
Each participating agency receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan\u2019s quarterly commentary of industry trends affecting agents and brokers.<\/p>\n
For further information and commentary, contact Tom Doran at [email protected]<\/span><\/a>. For information on participating in the OGP survey, contact Michelle Appelbaum at [email protected]<\/span><\/a>.<\/p>\n
About Reagan Consulting<\/b><\/p>\n
Reagan Consulting is a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm\u2019s services for insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, capital raise advisory, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Organic Growth & Profitability benchmark survey. For more information, visit ReaganConsulting.com<\/a>.<\/p>\n
Source: Reagan Consulting
<\/i><\/p>\nTags: Brokers<\/a>, growth<\/a>, independent agents<\/a>, Reagan Consulting<\/a> Read the original article at Insurance-Canada.ca <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"
Group Benefits shows Q1 weakness: Reagan Consulting Atlanta, GA (May 17, 2019) \u2013 The new year is underway and organic growth remains solid among agents and brokers in the independent insurance channel. However, \u201csome...<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/14974"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=14974"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/14974\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=14974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=14974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=14974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}