The independent insurance agent and broker channel posted an organic growth rate of 10.3% for 2023 — the highest annual level achieved since Reagan Consulting launched its quarterly Growth & Profitability study (GPS) in 2008.
At 22.8, the 2023 median Rule of 20 score surpassed the previous records of 22.2 set in 2022 and 20.6 set in 2021. A blended metric derived by combining the organic growth rate with half of the EBITDA margin, achieving a score of 20 or higher indicates an agency is meeting or exceeding historically expected investor returns for the sector.
“It goes without saying that this year’s record Rule of 20 result means that agency owners did quite well in 2023,” says Kevin Stipe, Reagan partner and CEO.
Growth by product line
For personal P&C, we are witnessing something unprecedented,” says Stipe. “The line of business that has historically grown by only 2 to 3% jumped to a record 10.3% growth in 2023.” Further, with the lag effect of rate-increase filings, he adds, “it is reasonable to expect that 2024 will be another year of solid growth for personal lines.”
Although dropping from the 2022 record high, commercial P&C organic growth achieved double digits again in 2023 at 10.9%. “The primary growth driver was the hard market — extending the current hard market to a remarkable six full years,” says Stipe.
Group benefits grew by 6.5%, which was lower than revenue growth in personal or commercial lines, but still represents the highest growth rate since 2018.
Profitability reaches new high
EBITDA margins set a record for 2023, topping 23% for the first time. During COVID-19, EBITDA margins jumped by more than 2 percentage points, driven by the temporary elimination of certain selling costs. “Many believed this spike in profitability would subside once the world returned to normal,” says Stipe. “But that hasn’t happened. Instead, brokers have held on to the margin gains achieved during COVID — and built on them.”
2024 Outlook
Agents and brokers are more confident heading into 2024 than they were a year ago, fueled by reports that the U.S. economy remains strong and a recession may not materialize, Stipe says. Survey respondents predict 2024 results will be nearly identical to 2023: organic growth rate of 10%, with EBITDA margins pushing 23%.
“Agents and brokers ended up setting new records for growth and profitability in 2023,” Stipe says. “Perhaps even more stunning is that they are now projecting a repeat performance for 2024.”
To receive the full Reagan commentary or more information about Reagan Consulting, contact Stipe at kevin@ReaganConsulting.com.
The Reagan GPS was launched in 2008. Every quarter, each participating agency receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan’s 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.
About Reagan Consulting
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.