By Michael Loney

May 19 - (The Insurer) - U.S. insurance brokers recorded lower organic revenue growth in Q1 compared to the same period last year, while the number of M&A deals was also down in the quarter, Reagan Consulting said.

In its latest quarterly update, Reagan said that Q1’s 7.9% growth marked 60 consecutive quarters of positive organic growth, with the most recent negative organic growth quarter 15 years ago. It compared with 8.4% in the first quarter of 2024.

Top quartile brokers recorded 12.5% organic growth in this year’s Q1.

“Despite the ongoing Trump trade war with our trading partners and accompanying tariffs, insurance brokers continued to post healthy organic growth results,” the Atlanta-based insurance advisory company said.

It continued: “Q1 broker profitability (29.3%) jumped slightly versus Q1 2024’s 28.3% result. Since a majority of contingent income is booked in Q1, we can expect to see these results tail off over the next three quarters.”

Personal P&C produced organic growth of 9.6% in Q1, the same as in the first quarter of 2024. Commercial lines growth of 8.2% in Q1 was down slightly from 2024’s Q1 result. Employee benefits growth totaled 7.5%, effectively matching last year’s Q1 result.

“Much of the lift in overall broker growth can still be attributed to rates, with a general consensus that property rates are decreasing nominally, while casualty rates continue to firm,” Reagan said.

Regan also calculated sales velocity, a measure of new commission and fee income expressed as a percentage of last year’s baseline. This metric increased to 11.9% in Q1, slightly higher than 2024’s 11.7% results.

“New business remained strong in Q1, despite a sputtering economy,” Reagan said.

U.S. broker optimism for 2025 remains high despite Q1’s modest slowdown in organic growth, with the average broker projecting 10% organic growth for the year, up from 9.0% at the same time of last year.

Reagan said that publicly traded brokers’ Q1’s results were mixed, despite equity markets turmoil driven by tariffs.

Organic growth for publics for which data is available was “solid,” Reagan said, “ranging from 5.0% (AON, Willis and Marsh) to 17.0% for Goosehead.”

The 100 M&A deals announced in the first quarter was down from 135 in Q1 2024.

“The market for high-quality brokers remains frothy, while mediocre brokers are finding exit strategies more challenging,” Regan said. “Buyers are increasingly more selective about the investments they are making in the market.”

However, Regan projects that this year’s deal total will be comparable to the 587 deals announced in 2024.

Valuations in the marketplace have “largely leveled off,” Reagan said.

“For the average broker, valuations, expressed as a multiple of Ebitda, have now remained consistent since 2022,” it said.

Reagan added: “With over 50 active buyers in the marketplace and a limited supply of sellers, competition is certainly contributing to the current valuation story. If the economy fails to recover as 2025 unfolds, broker growth and profitability are likely to suffer, and we could begin to see some downward movement in broker valuations.”