What will broker M&A activity look like in 2023?

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“Given the amount of capital in the market and the number of buyers in the space, we think 2023 will be an active year for M&A, although not as active as 2021,” Crites said.

Regan Consulting is a management consulting firm. Independent Insurance Brokers and Agents. Analysts said overall M&A activity this year was “neutral” as high interest rates made the cost of capital more expensive.

“Would sellers be comfortable selling now or would they wait? It really depends on where they’re at,” Crites continued. “But we think today’s market can provide great economic returns for anyone who’s built their business over 20 to 30 years.”

However, “well-run, young and specialized” agencies will continue to perform well in the 2023 M&A market. “If you’ve established a history of organic growth, everybody needs a seat at the table,” Crites said.

Organic growth slows in Q3 but is still strong for the year

Regan Consulting conducts a quarterly growth and profitability survey that tracks the performance of brokers and agents across the United States. The latest edition of the survey revealed that brokers and agents posted their first decline in organic growth in nearly two years. The organic growth rate was 9.5% in Q3 2022, down from its double-digit high-water mark of 10.2% in the previous quarter.

“We’ve seen accelerating organic growth so far this quarter. We’re still at nine-and-a-half percent organic growth in the first nine months of the year, but that’s a slight decline from the peak we saw last quarter,” Crites commented.

The loss of momentum could be a sign of economic realities beginning to affect the industry. But brokers and agents are setting a “blistering pace” in 2022, with nearly half (45%) of Reagan respondents posting double-digit organic growth.

In addition, only 1.6% of respondents posted negative organic growth results, the lowest percentage in the survey’s history — something Critez calls “impressive” given the current market uncertainty. Reagan has been conducting quarterly growth and profitability surveys since 2008.

“Some of the economic slowdown hindered new business opportunities for some customers, and that led to a slightly lower, but still strong, organic growth rate in Q3,” Crites said.

Commercially, commercial property-casualty insurance outperforms both individual and group benefits. Agents and brokers in this space posted average organic growth of 11.8% in the third quarter, a record year-over-year growth in Regan’s survey, up from 12.2% in Q2 of this year.

Group benefits insurance brokers and agents posted average organic growth of 3.9% in Q3 2020 to 5.8% in Q3 2022. Individual lines also performed better than they have historically, reporting an all-time high average organic growth of 5.9% in Q3. 2022.

Critics said: “The overall market, global unrest and slow economic growth will continue to trend. We have seen a slight decline in organic growth, but it is still at a high level due to a strong market in the property and casualty side of the business.

The insurance talent war is the biggest challenge

Economic headwinds rank high among concerns for independent insurance brokers and agents looking to grow their business next year. But for critics, The current war on talent Growth can make or break opportunities for an industry.

“Finding, developing, retaining and motivating the key people who drive the company’s growth is now our clients’ biggest challenge,” Crites said. “Locking in key people and giving them the opportunity to grow their books of business is a very important issue because it leads to growth opportunities for the company.”

Crites said telecommuting has exacerbated the talent war, as an employee in Kansas can work remotely in New York.

“If you don’t Hiring and recruiting for development“It’s going to be hard for you to compete with people who are aggressive and build niche initiatives or niche business in certain industries where they excel,” Crites said.

“We’ve seen the best companies doing well. Identifying and recruiting talent, having a growth game plan, and ultimately giving people opportunities to grow. It’s now a talent game in our industry.

What are your predictions for insurance M&A next year? Share your thoughts in the comments below.


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