Agencies and brokerage firms reported that their organic growth fell to 3.9 percent in the first quarter of 2017, the weakest growth rate since 2011.

According to Reagan Consulting's Organic Growth and Profitability (OGP) Survey, the drop had a lot to do with a sluggish economy in the first quarter.

"Soft property/casualty insurance pricing certainly contributed to the disappointing performance, but the primary reason appears to be an unusually weak U.S. economy, which showed its worst quarterly performance in three years," said Kevin Stipe, president of Reagan Consulting, an insurance agency management consulting and merger-and-acquisition advisory firm.

Despite the slippage, brokers are forecasting 5 percent organic growth for the year, Stipe said.

Profitability, defined as agent-broker earnings before interest, taxes, depreciation and amortization (EBITDA), has continued to recede, with EBITDA margins hitting 27.6 percent in the first quarter. First quarter EBITDA margins for OGP survey participants peaked in 2014 at 29.9 percent and have been sliding each year since, according to Reagan Consulting.

Reagan consultants say that EBITDA margins tend to be highest in the first quarter due to cash-basis reporting of contingent income, and then slide throughout the year.

"That is the lowest first quarter EBITDA margin we have seen among OGP brokers since 2012. Although most brokers forecast their full-year EBITDA margins will again hit the 20 percent level achieved in 2016, only one-fifth of survey participants believe their profit margins will improve in 2017," Stipe said.

"According to Reagan, organic revenue growth among insurance agencies and brokerage firms fell in 2016 to 4.2 percent- its lowest annual rate since 2011. The year ended on a positive note, however, as fourth-quarter organic growth outpaced the 3.6 percent in the third quarter.

Reagan consultants sees a widening gap between broker performance and valuations as concerning for investors.

"The publicly traded brokers' average organic growth in the first quarter was 3.8 percent, yet they traded at 12.7 times EBITDA as of March 31. That is extremely high compared with the historical multiple of 9 to 11 times EBITDA," Stipe said.

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