“The 2015 results indicate that Best Practices agencies continue to grow and build their businesses, and increase profitability, the key components of agency value,” says Robert Rusbuldt, Big “I” president & CEO. “We were not surprised that the independent insurance agency system remains stable and strong.”
- Baldwin/Welsh & Parker Insurance Agencies, Wayland
- Chase & Lunt, Newburyport
- Fair & Yeager Insurance Agency, Natick
- FBinsure, Taunton
- J.K. Olivieri Insurance Agency, Middleboro
- Kaplansky Insurance, Brookline
- Mid-State Insurance Agency, Worcester
- T. Edmund Garrity & Co, Cambridge
- Tetrault Insurance Agency, New Bedford
What great agencies get right….
“The 2015 Best Practices Study results further exhibited the stability of the independent agency system despite some challenges,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “Overall, Best Practices firms continue to demonstrate their focus on operating excellence and the financial results it produces. Most of the study’s participants have either grown their business or remained steady. The industry continues to prioritize staff development and technology.”
• Service Staff Productivity: The study revealed that revenue per employee, perhaps the best overall metric of productivity, increased approximately 5% over the three-year period. In similar positive trending, expenses as a percent of revenue have declined modestly over the cycle to a 2014 average level of 80.2%. Revenue per service staff member increased by approximately 6% in the commercial P&C line of business, and by approximately 1% in employee benefits. These relative results add up given the organic growth results in these lines of business.• Productivity: New business per validated producer increased across all size firms for both commercial P&C and multi-line producers, growing by 5.5% and 5.0%, respectively, since 2012. Employee benefits producers saw an overall decline of 4.4% on the same measure for the period, likely due to the significant transformation that side of the business is experiencing right now.• NUPP and Perpetuation: The net investment in un-validated producer payroll (NUPP)–a measure of commitment to future growth by way of new producer pipeline development–has remained steady and healthy throughout the period, with an average NUPP of 1.8% for all firms. This is particularly important as many agencies seek to maintain their independence and the outstanding investment private ownership continues to represent. Critical to the goal of private ownership is the ability to both develop high performers who serve as the next generation of owners and maintain strong performance that drives meaningful ownership opportunities. In an active market that continues to reflect a strong appetite for acquisition, planning for internal perpetuation is as important as ever. Focusing on the best practices that drive agency value remains one of the best tools available to firms of all sizes looking to achieve their long-term goals.• Profitability: Pro-forma profit margins–the actual profitability of an agency if non-reoccurring/extraordinary expenses and revenue, and excessive owner compensation and perquisites are normalized–remained strong. This was the case over the cycle period at approximately 26%, with smaller firms (defined here as those with under $5 million in revenue) outperforming their larger peers (firms with over $5 million in revenue) once again in 2014, posting results of 30% vs. 22%, respectively.