Good news doesn’t get old. Independent insurance agents and brokers have posted a fifth consecutive record-setting quarter of organic growth, according to a survey by Reagan Consulting. At 10.2% in the second quarter of 2022, their median organic growth reached double digits for the first time in the nearly 15-year history of the firm’s Growth & Profitability Survey.

Ever realists, however, agents and brokers have tempered their expectations for the year ahead, the survey found. “It appears that the industry is already feeling the impacts of the macroeconomic factors,” says Brian McNeely, executive vice president and partner of Reagan Consulting.

Agents and brokers anticipate organic growth of 8.5% through the end of 2022, but also see their operating profits decrease. “Expenses are now growing faster than revenues,” says McNeely, due to increased payroll costs and the loss of pandemic-related savings, including reduced travel expenses.

McNeely says a leading indicator of future organic growth ― sales velocity ― has already dropped this year, from 12.6% in Q1 to 11.8% in Q2. Sales velocity is a proprietary Reagan metric that benchmarks agency new business results. It is calculated by dividing new business written in the current year by the total of the previous year’s commissions and fees.

Unexpected results

Commercial property-casualty (p-c) sales continued to outperform other lines in Q2, posting organic growth of 12.2%. McNeely attributes the growth primarily to premium rate increases, but says that “a great economic environment including continued government spending,” has buoyed commercial p-c business.

McNeely says that “perhaps the biggest surprise was personal lines,” which posted a Q2 record high of 5.5% organic growth. Pricing increases were a factor, but agencies’ emphasis on selling personal insurance to high net worth prospects appears to be paying off, he explains.

Sales in group health insurance have not benefited from rate increases and continue to suffer from a pandemic hangover. Still, at 5.6% organic growth, group health sales reached their “highest Q2 growth since 2018,” says McNeely. COVID-related difficulties appear to be resolving, and “more opportunities are presenting themselves,” he explains.

For further observations and commentary on the Q1 results, contact McNeely at Reagan Consulting, 404.869.2523 or bmcneely@ReaganConsulting.com.

The Reagan GPS was formerly known as the Organic Growth & Profitability (OGP) Survey. Each participating agency in the GPS 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 survey, contact Michelle Appelbaum at 404.869.2541 or michelle@ReaganConsulting.com

Reagan Consulting is a management consulting firm providing strategic consulting, valuation, capital raising, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s 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 Growth & Profitability Survey