Reagan Consulting: Agent-Broker Profitability Reaches Record 21% for 2014
Survey Measures Large & Mid-Size Private Agencies & Brokerage Firms
FOR IMMEDIATE RELEASE
Kevin Stipe (404) 869-2532; [email protected]
ATLANTA (February 9, 2015) – Agent-broker profitability reached 21 percent for 2014 in the Reagan Consulting Organic Growth and Profitability (OGP) survey, a new record for the survey that began in 2008.
That median profitability for EBITDA (earnings before interest, taxes, depreciation and amortization) for 2014 was up appreciably from 19.3 percent in 2013 and 18.4 percent in 2012, according to the survey.
Reagan Consulting’s study also found:
- Median organic growth for 2014 was 6.2 percent, matching 2013 and 2012.
- The fastest growing segment of business was once again commercial lines, with an organic growth rate of 7.0 percent. Group benefits grew at a 5.7 percent clip.
- The median Rule of 20 score was 16.9, up from 16.5 in the prior year.
The Rule of 20 is the sum of an agency’s organic growth rate and one-half of its EBITDA margin; if the sum equals or exceeds 20, an agency is driving strong shareholder returns. Reagan Consulting uses the Rule of 20 to measure agency value creation.
“The agent/broker world grew in profitability for the fifth straight year — while sustaining positive revenue growth for a third straight year,” commented Kevin Stipe, president of Reagan Consulting, a management consulting and merger-and-acquisition advisory firm for the insurance distribution system. “These two metrics drive valuation, largely determine operating health, and are imperative to a firm’s ability to successfully perpetuate.”
EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization
Source: Reagan Consulting Organic Growth and Profitability Survey
Reagan Consulting has conducted its quarterly survey of agency growth and profitability since 2008, using confidential submissions from approximately 140 mid-size and large agencies and brokerage firms. Roughly half of the industry’s 100 largest firms participated in the most recent survey. Median revenue of the firms completing the survey is more than $17 million, making it the industry’s preeminent survey of mid-size and large privately held brokers.
Brokers surveyed forecast a median organic growth rate of 6.0 percent in 2015, the fourth consecutive year for a forecast in that range. Brokers are projecting a “pullback” in profitability for 2015 to 20.0 percent, Stipe reported.
For further information and commentary, contact Kevin Stipe of Reagan Consulting at (404) 869-2532 / [email protected]
Each participating agency receives a customized, confidential report of its performance compared with the overall survey results, as well as Reagan’s quarterly commentary of industry trends impacting agents and brokers. For information on participating in the OGP survey, contact Michelle Appelbaum at (404) 233-5545 or by email to [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 publicly owned and privately held independent insurance agents and brokers, bank-owned agencies, 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.
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