During our annual valuation work for agencies and brokerages across the country, one alarming trend we're noticing is that most are forecasting significant declines in contingent income this year, even though commission revenues are holding or increasing slightly. This could have sizable consequences for agency profitability.
Contingent income is a powerful asset. It comes in as revenue, but because there is typically no producer compensation associated with it, such revenue flows directly to the bottom line as profit.
Therefore, any change in contingent income, up or down, can have a dramatic effect on profitability.
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