What is a Retiring P&C Producer's Book Worth?

[Chrisl]

Any feedback from agency owners who have recently purchased a retiring producer's book of business OR feedback from any producers that have recently sold their book of business would be greatly appreciated:

P&C producer book of business annual revenue: $120,000

95% contracted carrier and 5% Excess Surplus Lines non-contracted policies

Mixture of personal and commercial

Agency Owners: Rough idea based on your experience as to the $$ amount you think such a book might be worth?

Producers having sold their book: Based on your experience, what amount did you sell your book for?

Thanks. Any feedback would be appreciated.

 

[Rick Deckard]

It's worth whatever someone is willing to pay for it.
Sorry, not the answer you seek.

What do you think it's worth? I find people always believe whatever they have or own is worth a little more than it should be.

 

[Herkster]

Any feedback from agency owners who have recently purchased a retiring producer's book of business OR feedback from any producers that have recently sold their book of business would be greatly appreciated:

P&C producer book of business annual revenue: $120,000

95% contracted carrier and 5% Excess Surplus Lines non-contracted policies

Mixture of personal and commercial

Agency Owners: Rough idea based on your experience as to the $$ amount you think such a book might be worth?

Producers having sold their book: Based on your experience, what amount did you sell your book for?

Thanks. Any feedback would be appreciated.

Ive read anywhere from 1.8-2.5x revenues, certainly dependent on make up of book, loss history, retention ratios, etc.

 

[todd02]

It's worth whatever your Agreement says it is with the agent. Are you a producer or an Agent? Are the policies in your name or the Agents? More info needed.

 

[Chrisl]

It's worth whatever your Agreement says it is with the agent. Are you a producer or an Agent? Are the policies in your name or the Agents? More info needed.

We are the agency. Policies are in the name of the agency. However, the producer with 25 years of service has owned his own book of clients and is now retiring. We are therefore in the position of buying his book from him.

There was no written agreement 25 years ago specifying an amount or factor to be used for purchasing his book in the event of a retirement. Therefore this will be approached in a manner similar to one agency buying another agency's book of business (ie negotiate a price for the book).

 

[whatyouwantfinally]

We are the agency. Policies are in the name of the agency. However, the producer with 25 years of service has owned his own book of clients and is now retiring. We are therefore in the position of buying his book from him.

There was no written agreement 25 years ago specifying an amount or factor to be used for purchasing his book in the event of a retirement. Therefore this will be approached in a manner similar to one agency buying another agency's book of business (ie negotiate a price for the book).

That's a really strange thing to not have ironed out in writing, but I'm assuming he has operated as a producer for the agency and the agency has always serviced the clients.

There are still too many factors to even give an estimate (location alone can make a big difference, for both profitability and potential buyers to drive demand for potential acquisitions), but having already been the servicing agency for the clients is great for maintaining and projecting retention on the book. Due to that, I'd put the value toward the high end of whatever books are going for in my area. I've seen people throw in a few extra bucks as an act of good will if the retiree has referral connections they'd like to stay tight with.

 

[Chrisl]

That's a really strange thing to not have ironed out in writing, but I'm assuming he has operated as a producer for the agency and the agency has always serviced the clients.

There are still too many factors to even give an estimate (location alone can make a big difference, for both profitability and potential buyers to drive demand for potential acquisitions), but having already been the servicing agency for the clients is great for maintaining and projecting retention on the book. Due to that, I'd put the value toward the high end of whatever books are going for in my area. I've seen people throw in a few extra bucks as an act of good will if the retiree has referral connections they'd like to stay tight with.

You're correct about the details being important in assessing value:

Case in point, in this particular instance the producer services his own book. Our agency has provided him with the markets we're contracted with, office space, supplies, phone, internet and marketing from time to time. As such, we've had a commission split all these years.

The producer is well connected in the community on the side of town our office is located in. Therefore, much like with a captive agent (generally the "face" of the company the policyholder is with), this producer has a strong connection with his insureds as being "their agent". Therefore when he retires, we anticipate the probability of attrition being a factor on some level.

 

[todd02]

You're correct about the details being important in assessing value:

Case in point, in this particular instance the producer services his own book. Our agency has provided him with the markets we're contracted with, office space, supplies, phone, internet and marketing from time to time. As such, we've had a commission split all these years.

The producer is well connected in the community on the side of town our office is located in. Therefore, much like with a captive agent (generally the "face" of the company the policyholder is with), this producer has a strong connection with his insureds as being "their agent". Therefore when he retires, we anticipate the probability of attrition being a factor on some level.

If it's 90%+ retention avg I'd say 2.5x revenue. If it's >90-85% 2x.

Also depends if there are some major commercial accounts if affected.

 

[nyc2phi]

Depends on the carriers available and their relationship with those carriers.

I know of a few people that tried to sell a good book that were appointed through a cluster like Smart Choice and were having trouble selling that book due to the strict contract with that cluster.

A book with a good carrier like an Erie or Auto Owners would go for closer to 3X if not over 3X.

 

[Chrisl]

Depends on the carriers available and their relationship with those carriers.

I know of a few people that tried to sell a good book that were appointed through a cluster like Smart Choice and were having trouble selling that book due to the strict contract with that cluster.

A book with a good carrier like an Erie or Auto Owners would go for closer to 3X if not over 3X.

This producer's book does contain a decent percentage of Auto Owners policies.

I'm looking into having the producer's book valued by a firm specializing in valuing agency's, books of business, etc.