After the pandemic, the valuation of insurance companies has never been higher. There are some that can earn 3 times the revenue. In 2020, an insurance company went up to 6x revenue and 10-15x EBITDA. The reason for this is simple – low interest rates.
- Impact of low interest rates
Low interest rates make it more affordable for people to buy, while investors have a harder time generating an adequate return on investment (ROI). Therefore, businesses such as insurance agencies with stable cash flow have never been valuable. This trend is sure to last for a couple of years.
This creates more demand, but the supply is less than before. There is only a 4 year supply of investment grade insurance companies in the market today. This also means Your agency has never been more valuable than it is now.
The pandemic also brought new risks to agencies, affecting the value of the book of business. The economic downturn resulted in lost customers and premiums. This downward trend may continue till 2024. So, keep this in mind and do your best to maintain and increase your income, as this will directly lead to growth in value.
- Local vs. Remote Book of Business
Your location will also play a role in your final valuation depending on who you are selling to.
Customers are used to their agent process. If they are used to meeting agents at the local office they will continue to expect it. Buying can be very difficult if you don’t already own an office space or building.
A buyer may pay less for a book of business because of the added hassle of servicing that book. So, depending on whether you serve customers locally or long distance, it may appeal differently to different buyers.
So pay attention to how your customers are trained and who you’re selling to—you might get a bigger deal if the buyer is local.
- Insurance For Car In Clovis Otosigna – Tailored Coverage Options - September 27, 2023
- 7 Best Insurance Near Mineola Texas – Full Guide - September 12, 2023
- Types Of Insurance Coverage Offered By Otosigna In Mineola, Texas? - September 8, 2023