Life/health agency for sale?

As we were signing up attendees for Best's Review's "What's Your Agency Worth?" webcast last spring, we invited comments or questions to ask during the event. Chris D. Callen, an agent from Westerville, Ohio, replied: "Those of us with a life and health agency are left in the dark when it comes to selling our business. A good article, with broker and evaluation services, would be appreciated by us L&H owners." Well, Chris, our cover story on page 26--"What's Your Agency Worth?"--is for you.

To learn about how life/health agency owners begin planning for a sale, I called Robert Pettinicchi, executive vice president and chief lending officer for InsurBanc. He knows the landscape because InsurBanc specializes in making loans to agencies nationwide. Pettinicchi also was a panelist for our webcast in June.

So, what makes a life/health agency attractive to buyers? The major asset to sell is not an "expiration" as is the case in a property/casualty agency, but a "relationship" defined by a broker-of-record letter, Pettinicchi said in an e-mail interview.

He notes that, generally, life/health agencies' succession plans fall into one of two scenarios: Sell to a larger benefits agency or sell to a property/casualty agency that wants to diversify. When the small life/health agency sells itself to a larger agency the principal effectively doubles the value he or she may realize, since they receive an up-front payment and some type of deferral or earn-out. However, Pettinicchi advises, those agencies with no succession plans may lose out when the music stops.

On a different note, we've sent a free copy of our latest supplement, The Guide to Understanding Insurance Ratings, with this issue. It's ideal for the insurance professional who is looking to present a company's financial and business conditions in a clear, objective manner. The Guide will help readers understand the analysis behind a company's rating, which will help them explain to clients what it means.