2022 Third Quarter Report: Agency mergers and acquisitions saw a year-over-year decline
Agents and brokers saw their first dip in organic growth in nearly two years in the third quarter of 2022, according to Reagan’s Quarterly Market Update, but growth still held steady at 9.5%, well below above the 4.7% growth seen in the third quarter of 2020. The third quarter of 2022 also ranked as the quarter with the second highest reported organic growth since Growth and Profitability Survey started in 2008. The highest organic growth of this period was recorded in the second quarter of 2022 (10.2%).
Commercial lines saw stronger growth (11.8%) in the third quarter of 2022 than personal lines, but personal lines posted its highest quarterly organic growth rate (5.9%) since the first quarter of 2022. start of the investigation. The report attributes this increased growth in personal lines to brokers working to complement accounts and build stronger relationships with clients.
Merger and acquisition (M&A) deals saw a year-over-year decline, with 369 in 2022 (through September 30) versus 631 in 2021. However, it’s important to note that 2021 saw a record merger and acquisition activity, which may have contributed to the sharp drop.
Private equity-backed brokers accounted for more than half of reported M&A deals in the first three quarters of 2022. The report hypothesizes that since the cost of debt rises each time interest rates rise, the percentage of these transactions backed by private equity could decline. .
Interest rates have increased significantly over the past year, from 0.08% at the end of 2021 to 3.08% at the end of the third quarter of 2022. Despite inflation and economic volatility, Reagan reports private agency valuations remain at record highs, with the typical guaranteed valuation multiple increasing by more than 100% from 2010.