Investing in an Independent P&C Company

[tampa304]

Hello Everyone.

Long time viewer here and looking for your suggestions(sorry the posting would be quite long)

I have been looking to invest(passively) my savings($50K) to generate predictable cashflow(monthly or quarterly or yearly).

I have looked at other investments like CD, Stocks and Bonds and they are risky and yields are less predictable and P&C seems like a safe bet as long as the policies are made to sound parties.

I found an independent P&C company in Florida which is looking for short term cash for marketing and expansion purposes.

I have the following details of the firm - would it be better to invest $25K as a short term loan(repayment plan of loan from current and future revenue) or take up a passive minorty stake for $50K investment. owner is open to both the options, has built the agency from scratch and is having a hard time expanding without additional resources($ and staff).

• Agency is 5 years old.
• No. of policies = 350.
• Type of policies = Commercial and Personal lines.
• 2012 Revenue = $90K
• Current book of business premium = $700K
• Average commission = 10%

If I invest $25K - how many months would it take to have it paid off with the revenue from premiums?
If I invest $50K - how much can I receive as a monthly return?

Appreciate your suggestions. Do I need to ask anymore
questions?

 

[fearsback]

I would find out there retention percentage. You will have to keep on staff to keep the current policies active. Good Luck

 

[tampa304]

I would find out there retention percentage. You will have to keep on staff to keep the current policies active. Good Luck

Thank you will find out.

Other than getting a business valuation done, is there a way to compare this firm to other independent p&c?

should I consider minority investment stake if the owner is in it for long haul?

 

[Sales71]

Hello Everyone.

Long time viewer here and looking for your suggestions(sorry the posting would be quite long)

I have been looking to invest(passively) my savings($50K) to generate predictable cashflow(monthly or quarterly or yearly).

I have looked at other investments like CD, Stocks and Bonds and they are risky and yields are less predictable and P&C seems like a safe bet as long as the policies are made to sound parties.

I found an independent P&C company in Florida which is looking for short term cash for marketing and expansion purposes.

I have the following details of the firm - would it be better to invest $25K as a short term loan(repayment plan of loan from current and future revenue) or take up a passive minorty stake for $50K investment. owner is open to both the options, has built the agency from scratch and is having a hard time expanding without additional resources($ and staff).

• Agency is 5 years old.
• No. of policies = 350.
• Type of policies = Commercial and Personal lines.
• 2012 Revenue = $90K
• Current book of business premium = $700K
• Average commission = 10%

If I invest $25K - how many months would it take to have it paid off with the revenue from premiums?
If I invest $50K - how much can I receive as a monthly return?

Appreciate your suggestions. Do I need to ask anymore
questions?

Bad investment he only averages 5 policies per month. He might be selling soon. There is not enough revenue to pay you the loan and pay staff and marketing.

Also what ins company does he deals with??

 

[donamese]

Bad investment he only averages 5 policies per month. He might be selling soon. There is not enough revenue to pay you the loan and pay staff and marketing.

Also what ins company does he deals with??

I was thinking the same thing. I don't do P&C but the production seems very low for 5 years in the business.

 

[tampa304]

Bad investment he only averages 5 policies per month. He might be selling soon. There is not enough revenue to pay you the loan and pay staff and marketing.

Also what ins company does he deals with??

Good point. Never thought of it.

If 5 per month is low then what is the industry average when it comes to selling number of policies a month?

I haven't asked the owner how many employees they have, am guessing maybe 2 or 3.

 

[BIG RED IS BACK]

only 10% commission and he apparently CANT sell a policy, must be a captive agency, which you probally cant invest in, period.

hell, you could probally BUY the agency for less than your investment.

 

[fearsback]

the average poliocy count in Florida should be no less then 15-20 per person. That is minimum. Stay clear of this one, smells a little fishy to me to only sell 700k in 5 years. Most Florida agents should be writing that in less then 2 years.

 

[b61mack]

The biggest thing you are investing in, is the owner agent. Is he a franchise? What business plan does he have? Is he a relative? Can you afford to lose the money? Are you ready to jump in and help? And if you decide to invest, HAVE HIM TAKE A DRUG TEST! I am not joking! If he is a go getter, and not on drugs, I don't see a problem. The book could be worth 100k+ I think the 50k, so the agency can get rolling.

 

[tampa304]

The biggest thing you are investing in, is the owner agent. Is he a franchise? What business plan does he have? Is he a relative? Can you afford to lose the money? Are you ready to jump in and help? And if you decide to invest, HAVE HIM TAKE A DRUG TEST! I am not joking! If he is a go getter, and not on drugs, I don't see a problem. The book could be worth 100k+ I think the 50k, so the agency can get rolling.

No. the owner is not a relative. I saw the listing posted on one of the broker listings.
I can't afford to lose my savings. However, I do want to help if it's mutually helpful.

Age of the Agency = XXX
No. of policies = XXX
Type of policies = Commercial and Personal lines.
2012 Revenue = XXX
Current book of business premium = XXX
Average commission = XXX%

What should the above numbers looks like at the minimum for anyone to be interested in?
Can someone more knowledgeable please fill in the "XXX" with realistic numbers?