FOR IMMEDIATE RELEASE
CONTACT: Brian Deitz, Reagan Consulting, 404.869.2593, [email protected]
Record Deal Volume, Strong Finish to 2017 Suggest Further Growth Ahead
ATLANTA (February 6, 2018) — Insurance agencies and brokerage firms ended 2017 with gains in organic growth and profitability in the fourth quarter, increasing their optimism about continuing good results.
The firms participating in Reagan Consulting’s Organic Growth and Profitability (OGP) Survey reported overall growth, which they expect will continue this year.
Agency organic growth in the fourth quarter of 2017 rose to 4.5% from 4.2% a year earlier, while the margin of earnings before interest, taxes, depreciation and amortization (EBITDA) went up to 20.4% from 20.0%.
“Factors fueling the firms’ optimism about 2018 include the Tax Cuts and Jobs Act (TCJA), which President Trump signed in December, as well a record number of mergers and acquisitions,” said Brian Deitz, partner at Reagan Consulting, a management consulting and merger-and-acquisition advisory firm for the insurance distribution system.
“A Reagan Consulting analysis suggests the TCJA will have a largely positive impact on the insurance industry, through materially enhanced tax cash flows among C-corporations and spending by insureds as corporate tax rates fall. In addition, the tax act is likely to provide lift to the valuations of most agency and brokerage firms,” Deitz said.
M&A deal volume “has been impressive in each of the last four years, hitting 492 transactions in 2015 and dipping slightly to 457 in 2016,” he said. “Transactions surged in 2017 to a record 558. Reagan Consulting believes that the improving economy, beneficial impacts of the tax act and relatively flat property-casualty pricing are likely to continue improvements in organic growth and EBITDA.”
Commercial lines p-c rates and growth in U.S. gross domestic product reversed slides in 2016, increasing in the fourth quarter of 2017 and driving brokers’ organic growth higher, Deitz noted. Group benefits decelerated modestly, to an average growth rate of 5.2%, but it remained the fastest-growing line of business for OGP participants.
“With profitability on the upswing and growth opportunities appearing ahead, we expect that agencies and brokerage firms will continue to see motivated buyers competing for deals. This suggests to us that M&A pricing will not decline, and it might even increase for strategically valuable targets,” Deitz said.
Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from more than 175 midsize and large agencies and brokerage firms. Over half of the industry’s 100 largest firms participated in the survey. The OGP study is the industry’s preeminent survey of midsize and large privately held brokers.
For further information and commentary, contact Brian Deitz at Reagan Consulting, 404.869.2593, [email protected].
Each participating agency receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan’s quarterly commentary of industry trends affecting agents and brokers. For information on participating in the OGP survey, contact Michelle Appelbaum at 404.233.5545 or [email protected].
About Reagan Consulting: 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’s services for insurance agents and brokers and other participants in the insurance distribution marketplace include: appraisals of fair market value, 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.
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