Should I Purchase This Small Book?

[BTFuzz]

$250k in premium or commission? I would not buy it for cash and neither will anybody else either. Offer 1.5 x revenue payable as 75% of the renewal commission over the next two
years. If the business goes out the door... you are not stuck paying for it.

Premium....
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That would be a can't lose proposition.

Maybe....the only way it is not is if it turns out to be non profitable. This is probably my biggest concern as there is only 1 1/2 years of loss runs to go on.

 

[Bertolinoins]

Premium....
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Maybe....the only way it is not is if it turns out to be non profitable. This is probably my biggest concern as there is only 1 1/2 years of loss runs to go on.

Are the commercial accounts placed with your main carriers... those that you currently qualify for profit sharing with? You mentioned it was mostly GL and workers comp... which led me to believe the business was probably not placed with standard carriers.

 

[Landersinsuranc]

I would watch out. Buying a commercial book is risky since that line of business has a lower retension.

 

[Cranson]

$250k in premium or commission? I would not buy it for cash and neither will anybody else either. Offer 1.5 x revenue payable as 75% of the renewal commission over the next two
years. If the business goes out the door... you are not stuck paying for it.

That would be the only way to go on this one. Only 1.5 years in business and selling seems very questionable. Plus if its not desirable business, I would assume most of the premium is placed with Surplus Lines brokers, and likely paying only 8 - 10% commissions. This book may not even be worth 1x annual revenue based on what you are telling us....

 

[BTFuzz]

It is standard business but I've talked to loss control reps that tell me it's very average business at best...the risks that they inspected at least. No surplus accounts here.
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Are the commercial accounts placed with your main carriers... those that you currently qualify for profit sharing with? You mentioned it was mostly GL and workers comp... which led me to believe the business was probably not placed with standard carriers.

Yes, they are with my main carrier.

 

[Cranson]

If loss control doesn't like it you may have issues renewing some of those accounts (at least with your existing carrier). Also with a higher risk of loss, I would be concerned of claims activity causing you to lose any potential profitability bonuses. Sounds like this could be a risky purchase, but at the right price (or structured arrangement based on renewals) it could also be a good buy. I would also hammer in on why he is selling only after 1 1/2 years. I wonder if he/she has medical/financial issues going on.....

 

[Bertolinoins]

It is standard business but I've talked to loss control reps that tell me it's very average business at best...the risks that they inspected at least. No surplus accounts here.
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Yes, they are with my main carrier.

I would take as pass on this one. If the quality of the accounts are not great and they have only been controlled for 18 months... this puchase will likely turn into a big headache and there isn't enough money involved to deal with headaches. In the time it will take you to transfer the book and pay it off you could probably write over $250k in premium that is in your sweet spot... preferred personal lines business. If you invested the same time and money in avenues of organic
growth the results will likely be better than $250k in premium. Transferring a book of business is a lot of work.

 

[BTFuzz]

I would take as pass on this one. If the quality of the accounts are not great and they have only been controlled for 18 months... this puchase will likely turn into a big headache and there isn't enough money involved to deal with headaches. In the time it will take you to transfer the book and pay it off you could probably write over $250k in premium that is in your sweet spot... preferred personal lines business. If you invested the same time and money in avenues of organic
growth the results will likely be better than $250k in premium. Transferring a book of business is a lot of work.

Thanks for this reply...at this point this is exactly how I am feeling. The negatives are far out weighing the positives and I think my time is better spent pursuing other avenues.

 

[b61mack]

i like the suggestion you had about paying for it out of the renewal commissions.. i guess it depends on the reason for the sale.. and if the accounts are close to you.... it has to be a deal that makes sense to you, or should i say makes cents for you.....

 

[Soaringagent]

Do you have the support staff to help with customer service for this book? Gen Liablity can be really service heavy with them sometimes asking for certs and this could take up a lot of your time