Acquisition

[Allen Trent]

Allen, you're absolutely right. I am not a principal and do not have ownership of my book. I appreciate all of the information everyone! I've been with the agent a long time and was hoping for partnership but obviously that ship has sailed. Now I'm just trying to figure out the changes to come and what to do moving forward. Thanks again.

Personally, I can't see these private equity companies sticking with this long term, as insurance agencies don't have high profit margins, relatively speaking, & have a lot of overhead & staffing needed. I saw several banks buy out agencies 15 years ago,only to discover insurance was more labor intensive for lower profits & there was no assets that could be invested for profit like is the case for a bank or an insurance carrier. Many of the banks sold off those agencies, in some cases for a loss back to the previous owner or other leaders in the former agency.

At a time when carrier commissions to agents have been declining & expenses pushed on to the agencies, I just don't know where the projected profits will come from to pay top dollar to buy agency, then pay to retain all staff/principals & continue the locations overhead. My money is on cutting expenses 1st.

First issues will be seen when markets drop or less money flowing into private equity.

 

[AZDave]

Personally, I can't see these private equity companies sticking with this long term, as insurance agencies don't have high profit margins, relatively speaking, & have a lot of overhead & staffing needed.

Time will tell. They make sure that the growth and retention come along with the acquisition by bringing in the Principles and just enough staff. They only acquire the preferred agency's that have stable growing & profitable (Carrier and Agency) books. After year 2 and beyond they will see a higher profit return on that book.

I do see a concern for the long term too. These Equity companies can be acquired or merged, and who knows the future with this new type of Super Agency.

It is certainly an interesting concept. The producer contract after two years tells one that they really are not interested in small accounts. At that time, all my accounts that do not produce at least $2500/yr in renewal fees/commissions would go to a 'service center' and no longer mine to get paid on. All new business must generate same $2500. Splits were fair at 60/40. This was for commercial lines.

 

[Allen Trent]

Time will tell. They make sure that the growth and retention come along with the acquisition by bringing in the Principles and just enough staff. They only acquire the preferred agency's that have stable growing & profitable (Carrier and Agency) books. After year 2 and beyond they will see a higher profit return on that book.

I do see a concern for the long term too. These Equity companies can be acquired or merged, and who knows the future with this new type of Super Agency.

It is certainly an interesting concept. The producer contract after two years tells one that they really are not interested in small accounts. At that time, all my accounts that do not produce at least $2500/yr in renewal fees/commissions would go to a 'service center' and no longer mine to get paid on. All new business must generate same $2500. Splits were fair at 60/40. This was for commercial lines.

The non principal producers tend to walk & take those accounts with them, so I would be shocked if the growth after 2 years stays as high. Maybe the non compete are still enforceable if the acquisition retains the same legal entity & name