Acquiring a P&C Book

[Proteam]

Hello everyone. I have recently been approached by a retiring Independent Agent to buy his book of business. His annual revenue is approx $450k with 90% Personal lines. He wants $1 mil but from what I have read on the boards the starting price should be 1.5 or 1. So 450k x 1.5 = $675k. I know he wants as much he can get for 30 years of hard work so I don't blame him. Any input would be greatly appreciated! Thanks

 

[CaptiveGuy]

You need to know the loss ratio, retention, and the mix of standard and preferred business. If he has a low loss ratio which leads to high contingency bonuses then the price may not be too bad.

There is some negotiating room depending on how much you can provide in cash as a down payment as well. Do your homework on this but you definately need some more info and possibly should reach out to one of those insurance business brokers like Oak Street.

 

[Proteam]

From what I know, his loss ratio is around 60% with a retention of 85%+ from what he has told me. Preferred book is 65/35 non-standard. I'll have to get an audit on his book to validate those numbers. Thanks for the input. I still think his offer seems a little high.

 

[CaptiveGuy]

I think you are right especially if that $450k revenue number includes his bonuses. You could always make a low ball all cash offer to him and see what he says. Good luck!

 

[Guest]

WHO CARE what he tells you, I want to see reports.

VERIFY VERIFY VERIFY

Also, how much of the book is SUBSANDAR business????

Also, what carriers does he have and is it competitive in your area? Do YOU have contracts with those carriers? If you dont, what are you gonna do with those policies?

This is a lot of work, alot of questions, etc.

 

[BTFuzz]

WHO CARE what he tells you, I want to see reports.

VERIFY VERIFY VERIFY

Also, how much of the book is SUBSANDAR business????

Also, what carriers does he have and is it competitive in your area? Do YOU have contracts with those carriers? If you dont, what are you gonna do with those policies?

This is a lot of work, alot of questions, etc.

Exactly! This is definitely not a simple yes or no answer. Don't hang your hat on the answers on this forum, do your homework and crunch some serious numbers...could be a great opportunity. Good luck!