Insurance agencies and brokerages saw organic growth rebound to a median of 4.6% in the second quarter of 2017, advisory firm Reagan Consulting Inc. said in a report issued Thursday.

This is up from 3.9% in the first quarter of the year, which showed the weakest growth rate since 2011, Atlanta-based Reagan said in a statement.
 
The reversal was spurred by such factors as a stronger-than-expected U.S. economy, more favorable property/casualty pricing and organic growth gains in both commercial and personal lines, Reagan Consulting President Kevin Stipe said in the statement.

“Agency and brokerage firms have shown remarkable resiliency after a disappointing first quarter of 2017,” Mr. Stipe said in the statement. “Firms participating in Reagan Consulting’s Organic Growth and Profitability (OGP) Survey are reporting greater confidence, forecasting 5% growth for the remainder of the year.”
 
Profitability, defined as agent-broker earnings before interest, taxes, depreciation and amortization, or EBITDA, also reversed course, surging to 24.6% in the second quarter. 

“In previous quarters, EBITDA margins have continued to recede, and first-quarter 2017 was the lowest among our surveyed brokers in five years,” Mr. Stipe said. “That changed in the second quarter, though, when brokers reported an EBITDA margin of 24.6%, up from 23.1% in the year-earlier quarter.” 

Reagan Consulting cautioned that EBITDA margins tend to hit their highest level in the first quarter, due to the reporting of contingent income, and decline over the course of the year.
 
“Pleasant surprises in the second quarter were robust organic growth in commercial lines, which rose to 3.9% from 3.1% a year earlier, and in personal lines (2.3% from 1.7%). The 2.3% organic growth in personal lines was the fastest growth rate since 2013,” Mr. Stipe said. 
 
Merger and acquisition activity among agencies and brokerages remains very strong, Mr. Stipe said, with historically high deal volume over the last two years. The pace is continuing in 2017, with 255 deals reported by SNL Financial in the first six months, ahead of the 221 reported in the same period of 2016. 

Despite the consolidation, Mr. Stipe said the number of agencies has increased during the last 10 years, according to the 2016 Agency Universe Study by FutureOne, a collaboration between the Independent Insurance Agents and Brokers of America and various insurers.

“What happened during that time is agencies have regenerated at a rate greater than consolidation,” Stipe explained. “Simply put, don’t count out agency and brokerage firms. They are showing great resilience and growth, and they continue to attract capital.”

Reagan Consulting has conducted quarterly surveys of agency growth and profitability since 2008, using confidential submissions from more than 150 midsize and large agencies and brokerage firms.