See data analysis following the graph below. The data shows the sales prices that
Allstate agencies sold for as a multiple of two measurements:
1. Allstate Earned Premiums (the blue trend line) – (designated as EP – aka Renewals) – this is the price of the agency as a multiple of Allstate Earned Premiums, and
2. Total Revenues (the red trend line) – this is the price of the agency as a multiple of the total revenues of the agency (including bonus, outside brokerage, financial services, etc.)
When Allstate agents were first required to convert to R3001 agents in 2000, there was expectedly some apprehension as to what the true value of an agency was or would be. The exclusive agent program had not been tested; however, the base price of agencies had virtually been set by Allstate with their 1.5 times buy-back provision.
From 2000 through 2003, the average price of an Allstate agency remained around 2.0 times Earned Premium. 2004 marked the first significant change in book prices, with the average book price increasing to almost 2.4 times earned premium. Allstate was competitive all over the country, and with an ideal Insurance market at the agent’s disposal, book prices continued to rise. Financing became more readily available through various nationwide sources and the market was flooded with approved and willing buyers, willing sellers and willing bankers looking to finance well in excess of two times revenues.
Book prices peaked in 2007, with the average book price reaching nearly three times Allstate’s earned premium. Significant bonus income drove the gap between price to revenues and price to earned premium wider during these glory days.
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