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MARSHBERRY PUBLICATIONS
For The Record: A MarshBerry Publication: Perpetuation - Stay the Course
January 2011
In a recent survey of insurance agency owners, MarshBerry asked, "How have the current economic conditions impacted your perpetuation plans?" At first glance, it was surprising to find that only 22% of agencies had indicated that their plans were put on hold, slowed down, or cancelled altogether. A significantly higher 78% indicated that the economic downturn had no impact on their perpetuation plans.
A MarshBerry Publication: Dealmaker's Dialogue - Let the Deals Continue
January 2011
2009 marked the lowest number of insurance brokerage deal closings in the last ten years. The financial collapse, lack of capital and depressed valuations slowed transaction closings in most industries.
For The Record: A MarshBerry Publication: Roadblocks to Perpetuation
December 2010
Several obstacles exist relative to internal perpetuation. The graph below outlines the primary reasons cited by agency owners: (see full article).
Dealmaker's Dialogue: A MarshBerry Publication - Year in Review
2010 began with M&A transactions closing at numbers consistent with the low levels seen in 2009. Deal count remained low in the first half given uncertainties about the economy, healthcare legislation, and weak pricing offered by buyers. Activity began to increase mid-year and now there is a firestorm of activity taking place. If all of the deals currently under letters of intent are consummated this year, the number of publicly announced transactions in 2010 will show a healthy increase over 2009 results, although not back up to 1999 - 2008 levels.
Dealmaker's Dialogue: A MarshBerry Publication - Creative Deal Structuring when Stock is Currency
November 2010
The utilization of a contractual agreement known as a collar can be a useful tool when dealing with a buyer who is using publicly traded equities as consideration within a transaction. A collar can customize a transaction to limit buyer and seller risk due to fluctuations in the buyer's per-share price as determined by the public exchange on which it trades.
For The Record: A MarshBerry Publication: Perpetuation - Controlling Your Future Viability
November 2010
As advisors and consultants to thousands of agencies for more than 30 years, we know that the majority of independent agents and brokers will NOT perpetuate ownership internally at a fair market value.
Dealmaker's Dialogue: A MarshBerry Publication - Fighting Over Revenue
September 2010
One of the most contentious areas of valuation and negotiation in a deal is revenue recognition. Relevant points of view include how the buyer and seller recognize revenue, along with negotiating the post transaction accounting methodology for the acquired entity.
For the Record: A MarshBerry Publication - Optimizing the Select Unit Threshold
September 2010
High-growth insurance agencies have a select unit in both commercial lines and health insurance. A select unit is comprised of accounts below a certain commission dollar amount (select unit threshold) that are handled by dedicated and segregated service staff. Select unit accounts are not comingled with producer books of business and producers do not receive renewal commission on these accounts.
For the Record: A MarshBerry Publication-Account Retention Analysis
August 2010
Account retention serves as the foundation for revenue growth. And when we analyze account retention, The Pareto Principle rules. The top 20% of your organization's accounts most typically represent 80% of the firm's revenues. The same percentages apply to departmental and individual producer books as well. Thus, your core institutional account retention focus should reside on the Top 20% of your accounts. more....Dealmaker's Dialogue: A MarshBerry Publication-Protecting Your Investment in an M&A Transaction
August 2010
Prior to buying a new car, an informed consumer typically asks about the warranty associated with the purchase. The automobile industry has dictated a standard package of 3 years or 36,000 miles of bumper-to-bumper coverage for any new car. This means that if something happens to the car (that is not the fault of the new owner), the Seller (dealership/manufacturer) has the responsibility to cover any costs associated with fixing the car. Buying or selling an insurance agency is no different. more....For the Record: A MarshBerry Publication-Organic Growth - Belief, Focus and Perseverance
July 2010
Never in history has the insurance industry faced such a difficult environment. The prolonged soft market, limping economy and widespread exposure compression have wreaked havoc on organic growth metrics and morale. To add insult to injury, now agency owners must figure out how to navigate through health care reform and increases in taxes on both ordinary income and capital gains. It is possible to grow through this challenging cycle, but not by accident. more....Dealmaker's Dialogue: A MarshBerry Publication-Due Diligence - Prepare for Success
July 2010
With proper preparation by both sides, the pain associated with due diligence can be minimized. The first step in this preparation is to gain an understanding, in advance, of both the overall process of due diligence and the key areas that will need to be reviewed. more....Dealmaker's Dialogue: A MarshBerry Publication-Stock Purchases versus Asset Purchases
June 2010
One of the first questions we ask a seller is, "Are you a C-corporation, S-corporation, LLC, partnership or sole proprietor?" Corporate structure is the primary element that steers a transaction toward a stock purchase or an asset purchase. more....Risk Management and Business Strategy in P/C Insurance Companies
June 2010
This paper discusses how insurance companies can use analytics to break strategic stalemates that prevent them from creating value. It shows what they need to do to generate the needed risk insights, at the intersection of the strategy, risk management, underwriting, investment and actuarial disciplines. more....For the Record: A MarshBerry Publication-Producer Book Benchmarking
June 2010
As producers seek to grow their book and maximize W-2 income, there are two fundamental issues. Either there are not enough accounts in the book or the existing accounts are too small, therefore consuming capacity. more....Eqecat: An ABS Group Company Activity of Catastrophic Windstorm Events in Europe in the 21st Century
June 2010
To develop a broader understanding within the re/insurance industry of the impact of climate change on catastrophic windstorm events in Europe, and to explore the applicability of certain aspects of the current state-of-the-art climate modeling to insurance-oriented loss simulations, EQECAT is collaborating with the Free University of Berlin (FUB) to investigate the behavior of the current and future activity of extra-tropical cyclones, as simulated by Atmosphere Ocean General Circulation Models (AOGCM). This white paper presents the results from the first phase of this study. more....Hub International: IRS Sharpens Approach to Audits of High Net Worth Individuals: What it Means and How to be Prepared
May 2010
In an attempt to close an estimated $345 billion1 "tax gap" between what it collects and what is owed, the IRS is pursuing a wide range of initiatives aimed at taxpayer noncompliance. Among these is the recent creation of a new enforcement unit, the Global High Wealth Industry Group. more....PD/BI Insurance Survey and Market Outlook
May 2010
One of the important requirements of AIRMIC members is access to more and better benchmarking data. In response to this requirement, AIRMIC commissioned Advisen to undertake research with the membership into Property Damage / Business Interruption(PD/BI) insurance. The research and the publication of this benchmarking report have been sponsored by Willis, the global insurance broker.The initial survey has yielded some interesting data. more....
For the Record: A MarshBerry Publication-Historical New Business Production Trends
May 2010
Driving organic growth is imperative for each agency given the sluggish economy and the soft rate environment. Despite the economic challenges, the top producers are not letting outside conditions like the soft market control their destiny. more....Dealmaker's Dialogue: A MarshBerry Publication- Change in the Accounting for Acquisitions
May 2010
As discussed in previous editions, merger and acquisition transaction activity was down significantly in late 2008 and 2009. However, over the last several months we have seen buyer and seller activity increase dramatically. This increase in activity, forces dealmakers who had been sitting on the sidelines to confront and understand the new accounting rules regarding accounting for acquisitions and the costs associated with doing a deal. more....Eqecat: An ABS Group Company North Atlantic Hurricane Near-Term Returns
April 2010
In addition to our long-term model for estimiting risk for North Atlantic hurricane activity, EQECAT has developed a near-term model based on the affects of the Atlantic Mutli-decadal Oscillation (AMO). Advances in climatology have led to great insights into understanding hurricane activity. more....For the Record: A MarshBerry Publication - Driving Growth - All Hands on Deck
April 2010
The updated table below illustrates the average annual new business production by producer for 2009. While the statistics are taken from over 2,000 producers in various geographic markets selling various insurance products, the statistics are more heavily weighted on commercial and group sales. The chart is broken down into four categories of producer type based on book size and experience. more....Securities Suits Ease Back to Normal Following a Frantic Two Years
April 2010
The wrath of the credit crisis and the ensuing Great Recession took its toll on securities litigation in 2008 and 2009. Securities class action suits (SCAS) remained strong during this period, but it was regulator activities from many levels that erupted. more....The Insurance Market in 2010: The Lingering Impact of the Recession on Capacity and Pricing
April 2010
The commercial lines insurance market has been pummeled by the combined impact of deeply depressed rates and declining written premiums resulting from the global recession. Nonetheless, insurers will post a profit for 2009 and capacity remains abundant. more....Data Security Issues Escalate as Risk Management Evolves
April 2010
Data security is a widespread problem for companies across-the-board. Any entity with a presence on the Internet, with sensitive data on servers connected to the Internet, or transmitting data such as credit card payments, is exposed to this risk. more....The Threat of Wage-and-Hour Lawsuits
April 2010
Wage-and-hour lawsuits have been an escalating threat to companies of all sizes over the past decade. Now outranking discrimination lawsuits, measured by both number of filings and size of settlements, these employment practices lawsuits have become an unforeseen calamity for companies across all industry sectors and a new challenge for risk managers. more....Chartis: Straight Talk About the Escalating Risks Facing Directors and Officers in 2010
April 2010
Directors and officers of American public companies face many substantial risks, not just the risk of their companies' success or failure in the marketplace. Every year, hundreds of directors and officers are sued, most notably in securities fraud class actions filed by professional plaintiff law firms. For decades, it has seemed every time a company's stock price drops by more than 10% in a two-day period, one or more plaintiff firms are likely to bring an action. more....Dealmaker's Dialogue: A MarshBerry Publication - Normalized Value
April 2010
As cash became a scarce commodity that no one seemed willing to part with in 2009, total merger and acquisition deal flow in the insurance brokerage space decreased by almost half of the number of transactions finalized in 2008. more....For the Record: A MarshBerry Publication - Agency Value in 2010
March 2010
For the average agency or brokerage, there exists a direct correlation between P&C Net Written Premium changes and agency value. Since the height of the hard market in 2002, average agency/brokerage value decreases mirror those of premium reductions. more....Online Social Networking: A Brave New World of Liability
March 2010
Millions of people across the world now participate on social network websites such as Facebook, LinkedIn and Twitter. Businesses have discovered that social network sites offer new channels to reach customers and prospects, and can be sources of valuable information for evaluating job candidates. more....The Insurance Insider: 2010 Legacy Barometer
March 2010
The Insurance Insider's annual survey takes the temperature of a legacy sector that has not seen the bumper crop of new business it hoped the financial crisis would yield at a time when the run-off market faces Solvency II opportunities and challenges. For more information about The Insurance Insider click here. more....The Insurance Insider: Global Power & Energy Review 2010
March 2010
The Insurance Insider's annual review focuses on a sector at the core of the modern productive economy, examining the key issues that affect dynamics for underwriters and insurance buyers across the upstream, midstream and downstream markets. For more information about The Insurance Insider click here. more....Dealmaker's Dialogue: A MarshBerry Publication - Striking a Balance
March 2010
Despite a significant downturn in the economy and a decline in deal activity, the average total potential transaction value as a multiple of Earnings Before Interest, Taxes, Depreciation and Amortization expense ("EBITDA") has not changed dramatically over the last several years. What has changed is the portion of the transaction price that is paid on a guaranteed basis and the transaction price that realistically can be expected to be paid based on reasonable projections of future performance. more....For the Record: A MarshBerry Publication - Reality Check: Bank-Agency Returns
February 2010
For the twelve months ending 6/30/09, the average total return on prior year value of a bank-owned insurance agency was a negative 10.2%. While total revenue slipped only 4.3%, the value of the intangible assets ("book-of-business value") declined by 18.8% primarily due to a drop in earnings. While a decline in the average EBITDA multiples had an impact on value, the average EBITDA itself declined by a sizable 14.8%. A drop in value of 18.8% plus average earnings for the year as a percentage of last year's value of 8.6% provides a total estimated return of negative 10.2%. more....Intellectual Property and the Internet: Copyright Infringement Liability in the Digital Era
February 2010
Copyright violations are rampant on the Internet, and copyright infringement lawsuits - some demanding hundreds of millions of dollars - are on the rise. more....Dealmaker's Dialogue: A MarshBerry Publication - Striking a Balance- Utilizing Personal Goodwill
February 2010
In more than 80% of the C corporation deals that have closed, the seller received a discounted valuation and the buyer lost significant tax savings either way, dollars evaporated. It is a shame that more aspiring dealmakers don't understand personal goodwill. more....Securities Suits Abound in a Harsh 2009
January 2010
Reflecting the general tenor of the first decade of the new Millennium, 2009 was a tumultuous year. From the depths of the Great Recession, to ballooning bailouts and a fictitious balloon boy, to the King of Pop's last moon-dance, to angry Tea Parties unfit for a queen, most feel happy to have left it behind. Securities litigation took a similar delirious path. more....For the Record: A MarshBerry Publication - Average Book-of-Business Composition
January 2010
The books-of-business built by the nation's leading agency and brokerage sales personnel look materially different than those of other sales people. Fundamentally, insurance sales personnel with the largest books maintain fewer, but much larger accounts than others. Individuals with the largest books historically sell the most new business commissions, drive organizational revenues and maximize personal W2 income. The graph below illustrates the correlation between book size, the number of accounts in the book and the average account size. more....The Insurance Insider: Trading Risk Annual Review 2009/10
January 2010
The Insurance Insider's sister publication Trading Risk offers the definitive guide to the year that has just happened, and to what lies ahead, with exclusive analysis and commentary complemented by the insightful thoughts and profiles of leading companies and industry figures. For more information about Trading Risk click here. more....For the Record: A MarshBerry Publication - Employee Vitality
December 2009
We recently compared the results of a comprehensive agency study on employee satisfaction with the Performance Indicator Numbers (PIN) of the participating agencies and found that the two are directly related. The PIN measures the profit, operational and equity perspectives of a given agency through the weighting of several ratios on a scale of 1-10. Our Employee Satisfaction study measures how satisfied employees are in terms of their Job, Agency Leadership, Work Environment and Agency Polices & Practices, also on a scale of 1-10. The Composite Score is the average of the four. more....European D&O Insurance Market to Benefit from Governance and Legal Reforms
November 2009
Directors & officers (D&O) liability insurance in Europe is primed for robust growth given changes to laws governing executive responsibilities and to collective litigation processes. Accounting scandals and corporate governance shortfalls in Europe cost investors billions of Euros in the early years of this decade. more....For the Record: A MarshBerry Publication - Weighted Average New Business Production
November 2009
As agents and brokers continue to refine 2010 strategies and budgets, new business sales remains the coveted prize. When dissecting budgeted revenue growth, agents and brokers can not directly control contingents, investment income or miscellaneous income. Additionally, agents and brokers cannot control the premium rates associated with commission and fee retention. High-growth agents and brokers focus acutely on that which they can control: New business sales and PIF retention. more....Planning for 2010: The Recession Will Keep Commercial Insurance Premiums Under Pressure
October 2009
Despite dismal 2008 results reported by property & casualty insurers, soft market pricing has prevailed in 2009. Recovering stock markets and a lack of significant insured catastrophes losses thorough the first half of 2009 have taken some of the financial pressure off insurers. more....Securities Suits Come Back Strong in Q3 2009
October 2009
Securities lawsuit filings came in at a high clip in the third quarter, but below frantic first quarter levels. With 169 suits, Q3 2009 was up 11 percent compared to Q2 2009. Both securities class action and securities fraud cases grew solidly, representing approximately three-quarters of all filings. more....The Battle for the Middle Market: The Role of Information in Creating a Sustainable Competitive Advantage
October 2009
In the battle for the large and profitable middle market, attracting and retaining top sales and account management talent is essential to success. more....Insurance Broker Economics: The Carousel of M&As
October 2009
A shift in strategy now pits the largest brokers against mid-size firms in a battle for the middle market. Driven in part by responses to investigations by then-New York Attorney General Eliot Spitzer. more....The Insurance Insider: Monte Carlo Roundtable 2009
October 2009
A year on from Lehman, the near collapse of AIG, and the Aon Benfield merger, The Insurance Insider brought together a panel of industry leaders at Monte Carlo to discuss recovering (re)insurer balance sheets, the subscription market, broker choice and soft market fears. For more information about The Insurance Insider click here. more....For the Record: A MarshBerry Publication - Weighted Average Producer Book
October 2009
In the September issue of For The Record, we showed that high-growth agencies have positioned themselves to be viable well into the future, by investing in and training young producer talent today. This is critical to establish the next generation of agency leadership as well as facilitate agency perpetuation, drive organic growth, and maintain key agency relationships. more....For the Record: A MarshBerry Publication - Agency Producer Age Dispersion
September 2009
In last month's issue, we covered the hiring and retention rates of producers for average and high-growth agencies. The data showed that high-growth agencies hire at a higher rate and cut the cord quickly on unsuccessful hires. Why are these agencies so focused on implementing a regimented producer hiring, training and retention program? more....For the Record: A MarshBerry Publication - Regimented Producer Hiring and Retention Programs
August 2009
Hiring and retaining producers who continually drive new business production remains a hallmark of high-growth agents and brokers. As annual leakage rates now exceed 15% of prior year's commissions and fees and will continue to climb in the short term, high-growth organizations focus on writing enough new business not only to offset the revenue leakage, but to far surpass it. more....Securities Litigation Drops in Q2 2009
July 2009
Is your agency's future planned or is it just luck that it remains in business? Most organizations do not have a formal strategic business plan that addresses how the organization will run in the future. However, the highest performing agencies, many of which are in MarshBerry's APPEX organization, conduct formal annual and/or quarterly strategic business planning sessions. A formal written business plan unifies agency leader's ideas and helps control the agency's future.Securities lawsuit filings fell off from in the second quarter from frantic first quarter levels, with 140 suits down substantially from 221 in the first quarter, but the average settlements and awards spiked. Filings were down across all securities case types, as securities class action, securities fraud and breach of fiduciary duties represented the lion's share of cases. more....For the Record: A MarshBerry Publication - Structuring a Business Plan
July 2009
Is your agency's future planned or is it just luck that it remains in business? Most organizations do not have a formal strategic business plan that addresses how the organization will run in the future. However, the highest performing agencies, many of which are in MarshBerry's APPEX organization, conduct formal annual and/or quarterly strategic business planning sessions. A formal written business plan unifies agency leader's ideas and helps control the agency's future. more....For the Record: A MarshBerry Publication - Building a Strong Balance Sheet
June 2009
We discussed the importance of maintaining a strong balance sheet in the May issue of For the Record. Data extracted from our proprietary database shows the dramatic decline of agency revenue and pre-tax profit (see charts below), suggesting that many agencies have had (or will have) to dip into their retained earnings. Those funds need to be replenished. more....Is a Hard Market in the Cards for 2009?
May 2009
Some insurance company executives are trumpeting the return of the hard market, but Advisen insurance program data from risk managers and brokers show that soft market conditions persist in most lines of business. more....Securities Litigation Surges in 2009: An Advisen Quarterly Report - Q1 2009
May 2009
With 169 securities lawsuits filed in the first quarter, 2009 is trending higher than 2008. Filings were up for securities class action, breach of fiduciary duties suits and cases filed in courts outside of the United States. more....For the Record: A MarshBerry Publication - The Importance of a Strong Balance Sheet
May 2009
The importance of maintaining a strong balance sheet has never been greater than during these difficult economic times, which are filled with unforeseen challenges and hurdles. Agencies that have managed their balance sheets effectively are better prepared to weather this (and other) storms as well as to seize opportunities that may present themselves as a result of others not effectively managing their balance sheets. MarshBerry analyzed several key balance sheet ratios as of December 31, 2008 to determine how agencies are positioned for this economic downturn. MoreThe Impact of the Economic Crisis on the P&C Insurance Industry
April 2009
Commercial insurance follows a boom-and-bust pricing cycle that, conventional wisdom proclaims, is largely uncorrelated with broader economic cycles. But the current recession is different. more....For the Record: A MarshBerry Publication - New Business Production - The Alternative Fuel Source
April 2009
For peak performing insurance agencies and brokerages, new business production continues to provide the fuel to outpace the economy. Stagnant top-line growth for the masses has rapidly evolved from an internal organizational problem into an external market excuse. Contingent income is falling. Investment income has already disappeared. Reductions in risk exposure, returned premiums and soft rates all exacerbate past growth obstacles. more....For the Record: A MarshBerry Publication - Valuation Comparables
March 2009
The thread by which agency value was hanging has snapped for the masses. Declining revenue and earnings, a limited agency buyer pool and a drastic reduction in insurable risk caused by the current recession have placed many in a valuation free fall. The following chart illustrates the 2008 valuation and earn-out comparables for banks and public brokers. more....Securities Litigation in 2008: Implications for the D&O Market in 2009 and Beyond
February 2009
The global credit crisis in the aftermath of the meltdown of the subprime mortgage market led to an explosion of securities lawsuits in 2008, but it was only one part of a rapidly shifting securities litigation landscape more....For the Record: A MarshBerry Publication - U.S. Brokerage Acquirers
February 2009
From 1999 through 2006, banks outpaced every segment in overall number of publicly announced acquisitions, but this slowed dramatically over the last three years. This deceleration will continue through 2009. In 2008, independent agencies and national brokerages expanded their acquisition programs, filling some of the void left by the banking segment. more....Advisen Ltd. – Your Information Source for Madoff Litigation Information
January 2009
Madoff Litigation Information more....Listen to the Jan 22nd Advisen Webinar on Madoff Litigation: D&O event, E&O event or non-event?
January 2009
Advisen is tracking 68 Madoff-related cases already filed, and more are being filed on a daily basis. But how many of these suits will lead to insured losses? more....For the Record: A MarshBerry Publication - Money in the Bank!
January 2009
The Working Capital Defensive Interval measures the number of days expenses that an agency has in net working capital. Many agencies report having the bare minimum, which may not be sufficient to weather the loss of a major account or take advantage of unforeseen opportunities. more....Dealmaker's Dialogue: A MarshBerry Publication - Enter with Eyes Wide Open
January 2009
Most of us are keenly aware that the current capital gains tax rate will automatically sunset at the end of 2010 reverting back to the pre-2003 level of 20%. Many believe it could be increased to as much as 35%. Few business owners have taken the time to determine how this will impact the return on their investment. Whether you are an active acquirer or an owner contemplating internal perpetuation or an external sale, it is important to understand the potential impact of such a change in the tax rate. more....The Hard Market is Coming (But Don't Hold Your Breath)
December 2008
A five-year soft market, fueled by chronic overcapacity, is coming to an end. Following two years of record profits, losses from both underwriting and investment activities are destroying excess insurance capacity, signaling that the bottom of the commercial insurance pricing cycle is near. more....Private Equity and Hedge Funds: The Shadow Capital Market
December 2008
Private equity firms and hedge funds have seen stellar growth over the past decade, riding the wave of easy credit and eager investment pools more...The Advisen Total Accrual Metric (ATACm): Back-Testing Underscores its Strength
November 2008
Utilizing the concepts of academic research on aggressive accrual accounting policies, Advisen introduced proprietary adjustments, and created a powerful tool - Advisen Total Accrual metric (ATACm) more...Using Value Investing Measures as Predictors of Lawsuits: Value Risk Tools
September 2008
Advisen is committed to providing a portfolio of measures for insurance professionals, only available on Advisen, to consider in assessing the risk of companies.more...Data Security: An Emerging Liability Threat
August 2008
Data security breaches can potentially cost companies tens of millions of dollars in fines and penalties, loss mitigation expenses, and settlements of lawsuits. more...As insurance products become more sophisticated and responsive to the data security risks of large companies, and as enterprise risk management processes are more widely implemented, corporate risk managers will be increasingly involved in the treatment of cyberliability exposures.For the Record: A MarshBerry Outlook: Hanging By A Thread
March 2008
For the majority, agency value is hanging by a thread. The string is about to break. For the minority that are willing and able to execute a plan to combat sustained soft market conditionst hrough organic growth and strong core operating profitability, valuations will remain strong and in some cases increase. more....For the Record: A MarshBerry Outlook: Embracing Differentiation to Drive Organic Growth Leveraging
Organic Growth Through Value-Added Differentiation
October 2007
Whether public or private, agents, brokers or carriers, growth and consolidation are increasingly shaping strategic initiatives across the insurance distribution system for 2007 and beyond. more....A MarshBerry Outlook: Banks in Insurance: A Comprehensive Look at the State of the
Bank-Insurance Brokerage Industry
October 2006
"Cross selling is a pipe dream. Every bank has failed in insurance and it will never work." Conceding the fact that financial institutions have failed to capture initial cross-sell penetration goals to date, bank insurance distribution is still evolving. Leading banks will make it work. more....