James Simpson finds that all the action is among the mid-table players, while the Top 10 are nursing profit cuts.

After another year of generally soft markets, regulatory changes and investigations bedding down, and numerous acquisitions one would expect there to be some changes in the shape of the intermediary market.

The cumulative revenue graph, however, highlights the fact that since the hard market of 2002 the total revenue of the Top 50 has not really moved at all. This year's Top 10 have the lowest proportion of the Top 50 revenue since before the 2002 hard market, despite the entry of Towergate and strong performances by Willis and the AA.

The soft markets work against organic growth/consolidation, it is easier for brokers to get alternative quotes and for clients to encourage competitive tendering for their valued accounts. It would appear that only by going through the acquisition and consolidation process has the total revenue held up. Brokers that have not made acquisitions will have worked very hard to maintain their position in the table.

The newcomers this year are Jelf and Highway, both achieving this following a series of acquisitions.

The big five are not looking so big anymore - the growth of London market and international brokers has been negligible, with Aon and Marsh both losing revenue in the UK and changing places again and only Willis really seeming to move ahead (based on its US 10K return).

The impact of the Spitzer inquiry must account for some of the loss of revenue by Aon and Marsh. With the need to spend considerable amounts of time and resource re-engineering their internal processes, it is not surprising to see that they must have taken their eye off business development. Client pressure will not have helped either and other brokers have not been slow to take advantage of the opportunity presented to them to go after the middle market.

Willis has achieved good growth and would expect to be able to continue this progress. Unfortunately, it is the only one of the larger brokers that has not filed its UK accounts and thus we have had to extract this information from the US filed information.

It is slightly further down the table that the growth interest really develops - the AA, Towergate and Swinton have all moved ahead well through organic growth and acquisition. The AA's growth of 25.2% is very impressive in a personal lines market that has seen rates continue to soften. The other Top 50 personal lines brokers have also done well, as the sector has seen growth of 17.2% overall.

Where has this growth been coming from? Could it be that this is further movement from ex-Hill House Hammond clients and that the direct writers have not done so well?

The acquisition market has been very active over the past 18 months and we are now seeing the results of this consolidation coming into the Top 50.

It has been the regional commercial businesses that have been the focus of these activities; the London market has seen very little movement, although the rumour mill has now rumbled into action. The top six fastest growing companies are all acquisition led, it is only when you get down to seventh, ninth and tenth that there is good organic growth - all coming from personal lines.

It is now 18 months after FSA regulation took effect and the predicted wholesale rush to consolidate. Has it really happened? Having been a sceptic on the subject, IMAS now believes that it has started to happen but in the middle market - retail commercial companies are acquiring the smaller ones not in the Top 10 or 15 London market companies.

As noted above, the fastest growing companies are those that have done so by acquisition. Highway, Jelf, Primary, Smart & Cook, Towergate and Oval would all top a sellers' list of whom to approach with a business.

Aon, Marsh, JLT, Benfield and Alexander Forbes have not really put their toes in the market. Willis is the exception, having acquired the general insurance side of Opus and continuing to defend its network participants, but none of them gives the impression of having the appetite of the other recognised acquirers. Heath Lambert has been eyed up and down, but no one has taken it on yet.

With the ready availability of finance for acquisitions we would expect the acquisition trail to remain busy. It is the middle market players that will continue to dominate as they offer the more culturally sympathetic home for businesses in the £2m to £10m income range.

Even at the size that Towergate has reached the culture appears more attractive than approaching any of the largest companies. The management style would appear to be more devolved and the centre more supportive and accessible than being remote and anonymous.

At IMAS we are more interested in profits than brokerage, although getting to what a privately owned brokers' profits really are is a difficult task and one not made any easier by the delay in filing of accounts and trying to differentiate what is the reward for executive roles rather than investor return.

The more historic analysis that we have conducted in this area is materially distorted this year due to the number of companies that have made significant recoveries after a poor preceding year and heavy provisioning for liabilities.

The majority of the Top 10 brokers have suffered reduced profits in 2005, the exceptions being the AA, Towergate and Swinton. Most of those showing declines have taken big provisions for reorganisation costs and/or their pension fund deficits, but with generally declining incomes poor profitability was to be expected.

Further down the table the picture is more varied; this is where recoveries and acquisitions really distort the picture, so no conclusions can really be drawn from this.

With the introduction of FRS 17 we can now start to see which brokers have material liabilities in their pension schemes under this measure.

Looking at the Top 50 overall we were immediately struck by how few of them have defined benefits schemes and hence how few have a liability.

A closer look clearly identifies the fact that many of the Top 50 companies are relatively new businesses, or started life as relatively small companies and did not go down the route of having defined benefits. Only 16 companies in the Top 50 now have defined benefits schemes.

Of those with defined benefits schemes the range of the liability to brokerage income is dramatic, from 109% at Aon to a positive 0.76% at HSBC. Heath Lambert had a liability of the same sort of order as that of Aon, but this was left behind when the company restructured in 2005.

Leaving out Aon, the majority of the liabilities are in the range of 10% to 40% with an average of 16.2%. This would have been thought a manageable scale that could be worked through so long as the businesses hold their earnings together. With falls in income due to weak US dollar rates and continuing generally soft markets, meeting this challenge is recognised as not necessarily being an easy task.

The presence of these liabilities is likely to prove a hindrance to corporate activity, particularly for vendors, but also for purchasers who seek to use their own shares as part of the consideration. Dealing with the short term is a serious challenge for management.

We believe that employees are the most valuable asset a broking business has. Brand is important for personal lines businesses, but it is the staff that deliver and maintain this brand.

Measuring employee performance is an industry in itself, and we have restricted ourselves to two basic measures - income per employee and profit per employee, and looked at these in absolute terms as well as improvements year on year.

Income per employee tends to be highest in London market and international brokers. They occupy the top 19 places in the highest income per employee, with Carvill and Benfield leading the way as they did last year.

The broker in twentieth place is the AA, a good performance despite being a more labour intensive personal lines broker and based on having the largest improvement in turnover per employee of any broker. Along with recording excellent overall growth in income and profits, 2005 was a very successful year for the company.

Other notable improvements in income per employee were turned in by Newman Martin & Buchan with 13.6%. Improvements from non-London brokers were headed up by RIAS with 13.5%, Lark with 9.9% and Outright with 9.8%.

Profit per employee is a more critical measure as it provides an indicator of the possible resilience of the business and the likelihood of competition.

The availability of data does however make it a less than complete picture across the Top 50 and a number of turnarounds distort the picture of improvements in this measure.

At the top of the profit per employee table is Windsor with the best part of £31,500 per head. This is followed by Benfield (despite a big decrease), then Open + Direct and then Towergate with operating profits of almost £25,000 per head. The scale of profit per employee starts to fall away quite quickly after this with the tenth placed broker, Howden, producing £16,120 per employee, the fifteenth £11,770, the twentieth £8,820 and the twenty fifth producing £6,950.

Improvements in profit performance, excluding turnarounds, are much more varied. With Firstcity and the AA coming back from losses in 2004, the top performer is Millers which more than doubled its profits per employee, along with Kwik-Fit just behind it. Another notable performer is Hyperion which increased profits by 89.4% showing that acquisitions are no hindrance to this.