Insurance agency book value

Not all books or agencies have this kind of profit. We defined the value of a business as the present value of the future returns i. A marketplace for highlevel transactions needs for insurance agency principals and. Value an insurance agency the insurance agency mergers and. In fact, we complete over 120 valuations of insurance agencies and brokerages. Valuing your insurance agency american agents alliance. There is no correlation between the value of a business and a sellers retirement goals. Most insurance agency buyers have done more than one deal in their careers, but most insurance agency sellers only sell and insurance agency once. The whole business entity would include the value for the operation book of business plus the tangible net worth from the balance sheet.

However, there are a few ways to increase the value of your book, which includes selling more insurance, having more new business not business going into its 6th year of renewals, having a crm, and selling to your fmo. If youre looking for a new or used vehicle, nows a perfect time for you to get a quote on car insurance from geico. Car insurance companies can use their own formulas for determining your cars value, or they can use a site like kelley blue book or nada to determine your cars value. Posts about value an insurance agency written by michael mensch. If an agency rolls a book of business into an existing agency versus leaving it as a standalone firm, there is usually a much better chance of having this type of profitability. For this example risk has been measured and the potential of sustaining a 34 percent pretax pro forma profit is set at 5.

Generally speaking, the sellers gain on these assets excluding a noncompete allocation more later will be taxed as a long term capital gain. This question is one of the main reasons people call our office. It is rare for an insurance agency to possess enough hard collateral to secure a large enough loan to purchase an existing book of business. Our clients include retail agents, mgas and program administrators. Table 2 provides a graphical representation of this continuum of agency value multiples. There are many things that go into the valuation of a book of a business and well cover that shortly but. If your insurance agencys selling price is based solely on receiving a certain dollar amount to finance your retirement, you need to rethink your strategy.

This opinion of value is less expensive than a full valuation and. Insurance valuation insight a couple of key metrics can be used to value insurance companies, and these metrics happen to be common to financial firms in. I dont need a valuation, one owner told me, i know how it works. Usually profitability is in the 15 percent to 25 percent range today. All answered yes in addition, contributors hold a number of insurance industryspecific professional designations, including. For this reason, you will have to find a lender who specializes in financing insurance businesses and understands their inner workings. Click here if you would like to sell your insurance agency or insurance book of business and need assistance. Age and employment status of key employees, especially producers. Lastly is the present value of future earnings approach. This puts the seller at a huge disadvantage so representation not only helps you maximize value, but enables you to continue running your agency during the. Including the balance sheet could swing the value of the business one way or another, depending upon such items as the debt situation or if there is excess cash. When using more than one method to value a book of business, each method should be weighted against the others for appropriateness to the agency situation. He hadnt done any prior homework or planning for this exit strategy.

For an insurance firm, book value is a solid measure of most of its balance sheet, which consists of bonds, stocks and other securities that can be relied on for their value given an active market. Taxes when selling an insurance agency the insurance. Oversimplifying the value of an agency, or any business for that matter, can lead to disastrous results for a buyer. When buying or selling an agency, be sure the price is right. In fact, we complete over 120 valuations of insurance agencies and brokerages each year for agency owners, buyers and lenders all asking for our professional opinion on agency market value. This opinion of value is less expensive than a full valuation and may be the best option for the sale of a small agency. Since the majority of the value of an insurance agency is intangible, most of the sale price will be allocated to class vi and vii assets.

Generally, there are very few agencies that value at the extremes of 4 or 7 times ebitda. How do i sell an independent insurance agency or book of. Key factors to include when valuing your insurance agency. If the time has come for you to explore selling your insurance agency or book of business, we at mkl can help you avoid the pitfalls that come with the complicated path of keeping the process confidential, maximizing the value of what you have built and finding the right buyer who will pay you cash at the close of the sale. Many insurance agency owners have long relied on an old formula for determining the value of their business. There are so many variables that affect how much your book of business is worth. The owner wanted to sell and thought a multiple of revenue of 1. The base long term capital gains rate is 15% for single. Value an insurance agency the insurance agency mergers. Use of an income based approach to value an agency is the most commonly used and often the most appropriate of the valuation methods available. It is estimated that 80% of businesses for sale ultimately do not end.