Posted on 29 Apr 2008
A comprehensive overview of the state of the insurance distribution system for 2008 and beyond has been released by Marsh, Berry & Company, Inc, documenting historical and projected insurance agency/broker value, merger & acquisition activity, and organic growth best practices that can help agencies and brokers exploit changing market dynamics.
Based upon current economic indicators, declining organic growth rates, and a shift in merger & acquisition supply and demand dynamics, MarshBerry is forecasting average agency/broker valuations to drop. Average organic growth rates during 2007 fell to around 3.7%. Combining this with projections of a slowing economy and continued soft market insurance rate conditions, future earnings enhancements for agencies/brokers will become increasingly difficult.
Projected M&A deal pricing will also stabilize. After several years of fierce buy-side competition between public brokers, banks, and private equity firms drove deal pricing to premium levels in excess of 8.0X EBITDA,
the future will experience stabilizing pricing for the masses. The insurance market will see fewer buyers combined with an increase in supply. Deal supply by independent agencies will expand over the next several
months for a number of reasons:
-- Stock is too narrowly held and the average weighted age of owners is in
the mid 50s
-- Continued soft market conditions will hinder internal return
-- The fear of capital gains increases
-- The threat of national health care
-- Falling agency valuations
For more information, go to: http://www.MarshBerry.com/Spring2008StateofIndustry
Marsh, Berry & Company, Inc., founded in 1981, is a management consulting firm for the financial services industry and the nation's preeminent provider of consulting services for independent insurance agency
owners and brokers. Services include agency valuations, perpetuation planning, compensation strategies, sales training, operational consulting, E&O, work flow and procedures, financial management, strategic planning and mergers and acquisitions.