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Description

OFF-MARKET ‘Q2 2020

Portable Commercial Insurance Book 60% Construction
(Los Angeles County) – (Relocatable)
Seller Financing Available!

  • Asking Price: $2,700,000.00
  • Cash Flow: $540,000.00
  • Gross Revenue: $1,000,000.00
  • EBITDA: N/A
  • FF&E: N/A
  • Inventory: N/A
  • Established: 1999
  • Employees: 4

Business Description:

Large book of commercial accounts, ~600 clients split (40% WC / 40% GL / 20% Commercial Auto & the rest – no benefits). Has a direct State Fund Appointment, and acquirers with a direct appointment would likely have an easier go of it. Clients are spread across California – 80%, other states include NV, AZ, (TX & OR have a handful of accounts). An immense range of trades spanning construction, transportation, manufacturing, small businesses across the spectrum. Seller is a 30-year industry veteran with a vast network of insurance carrier relationships. Seller is looking to stay with the business for a year or two and team up with a well-capitalized Buyer that can provide the infrastructure to service the existing book plus expand the revenue and client base using his extensive sales training background.

NDA required for release of detailed CIM.

Detailed Information

  • Facilities: Relocation is fine, or keep the space, whatever is clever.
  • Competition: A competitive space but relationships keep retention high. They provide exceptional service so the book is pretty sticky.
  • Growth & Expansion: Doesn’t do any benefits, or any personal lines, massive potential to cross-sell is here.
  • Financing: Seller will carry for highly-qualified Buyers with a substantial down payment.
  • Support & Training: Extensive transition period available with TBA terms and conditions subject to mutual approval.
  • Reason for Selling: Wants to pursue creative endeavors rather than stay as CEO / Owner with myriad responsibilities.

Industry Trends:

Companies in this industry act as agents to sell insurance policies and annuities underwritten by insurance carriers. Major companies include Arthur J Gallagher, Brown & Brown, and Marsh & McLennan (all based in the US), as well as Aon, Lloyd’s, and Willis Towers Watson (all based in the UK).

The global insurance industry, which includes carriers as well as agents and brokers, generates about $4.9 trillion in premium volume each year, according to Swiss Re. The US insurance agencies and brokerages industry include about 134,000 establishments (single-location companies and units of multi-location companies) with annual revenue of about $138 billion.

Many companies that primarily offer insurance products to businesses function mainly as brokers. Independent brokers sell products from several providers.

Property and casualty agencies sell policies that cover homes, cars, and other personal property. Agents sell commercial lines to businesses that are designed to cover company assets and industrial properties. Standard personal lines include auto, home, and property coverage; for businesses standard lines may cover property, medical malpractice, workers compensation, and product liability.

To win business, agencies rely on marketing, client referrals, and customer service. Name recognition, connections with more insurers, and the ability to craft more complex insurance packages are benefits of belonging to large brokerage networks. Small agencies may compete by specializing in a specific product line or customer group.

More insurance agents are selling financial planning services to their clients following deregulation of the market through the Gramm-Leach-Bliley Act of 1999, which allowed the insurance industry to sell financial products. Agents can become licensed to sell mutual funds, variable annuities, and other securities, and many captive agents were encouraged to branch out into this area by the carriers they represented. As insurance and financial products have become more complex, agents have become an important source of information about these products. When the economy contracts, demand for insurance falls as consumer income and commercial activity decline. During periods of economic difficulty, smaller agencies may branch into more diversified fields to build a business.

Despite the prominence of large companies in the commercial segment, the US industry remains highly fragmented: the largest 50 firms account for about 25% of revenue. Agencies that represent trusted insurance brands have a greater chance of attracting and retaining customers. Agencies gain contracts to promote policies from recognizable names such as Progressive or MetLife. Representing well-thought-of brands can help agents bring value to clients with strong policies, support tools, and referral networks. Information management systems allow agencies to track customers, policies, receivables, and other business operations.

Overall Growth:

Overall IT spending among insurance companies in North America is about $75 billion, according to Celent, a consulting firm. Insurance companies are investing in digital distribution tools as insurance policy sales increasingly move online. Insurance agents use sales portals to facilitate quote comparisons and establish new policies. Agencies and brokerages also obtain software that can help attract and retain customers as they increasingly compete with direct sales websites that eliminate the middleman. Insurance agencies are embracing mobile technology. Carriers are offering downloadable apps to enable employees and customers to access information on the go. Many leverage mobile capabilities such as geo-location and portability in order to enhance user experience. As insurance agents increasingly record, manage, and analyze customer data through digital systems, companies must invest in cybersecurity. Continuous evaluations and upgrades of systems are necessary to safeguard against data breaches.

Bright Outlook

The ultimate way to create instant growth is to round out the customers with additional policies. He has not campaigned current or previous customers asking them to purchase other types of policies. But he highly recommends that a Buyer do so.

Many of the clients are well-to-do and are successful business owners; they own and operate large construction and manufacturing businesses. It makes sense to offer them life, home, mortgage, and personal insurance policies. The clients are quite loyal and likely receptive.

Additional opportunities will be available if someone on staff has securities licenses and can offer additional and a broader scope of financial services. Collecting more audits would be another way to increase revenue. To grow business, the Seller also recommends closely following new construction growth via trade associations and state licensing/permitting boards.

Contact info

Pronova Partners

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