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2018 Q4

 

Fourth Quarter 2018 Allstate Agency Value Index

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Mergers Help Small Book Values

 

Allstate Agency Price to 12MM Earned Premium Ratio (National Average)
$0 to $100,000
$100,001 to $200,000
$200,001 to $300,000
$300,001 and up
Simple Average
Low
High
2000
N/A
N/A
N/A
N/A
0.202
0.117
0.262
2001
N/A
N/A
N/A
N/A
0.209
0.133
0.311
2002
N/A
N/A
N/A
N/A
0.197
0.119
0.255
2003
N/A
N/A
N/A
N/A
0.199
0.147
0.254
2004
N/A
N/A
N/A
N/A
0.236
0.157
0.393
2005
N/A
N/A
N/A
N/A
0.259
0.175
0.398
2006
N/A
N/A
N/A
N/A
0.298
0.188
0.402
2007
2.37
2.65
2.92
3.01
2.96
1.21
4.56
2007
N/A
N/A
N/A
N/A
0.292
0.121
0.456
2008
2.32
2.41
2.74
3.13
2.71
1.45
4.06
2008
N/A
N/A
N/A
N/A
0.271
0.145
0.406
2009
2.14
2.35
2.50
2.78
2.46
0.82
3.97
2009
N/A
N/A
N/A
N/A
0.247
0.082
0.397
2010
N/A
N/A
N/A
N/A
0.24
0.106
0.353
2010 1st QTR
1.94
2.29
2.52
2.91
2.39
1.06
3.53
2010 2nd QTR
2
2.27
2.47
2.8
2.37
1.17
3.16
2010 3rd QTR
2.22
2.26
2.5
2.74
2.43
1.42
3.31
2010 4th QTR
1.94
2.33
2.49
2.76
2.41
1.95
3.28
2011 4th QTR
N/A
N/A
N/A
N/A
0.231
0.12
0.366
2011 1st QTR
1.78
2.36
2.49
2.73
2.47
1.2
3.57
2011 2nd QTR
1.99
2.37
2.41
2.53
2.33
1.2
3.66
2011 3rd QTR
1.89
2.16
2.45
2.7
2.25
1.5
3.66
2011 4th QTR
2.05
2.23
2.45
2.52
2.34
1.62
3.37
2012 4th QTR
N/A
N/A
N/A
N/A
0.229
0.127
0.336
2012 1st QTR
1.87
2.2
2.41
2.54
2.3
1.47
3.07
2012 2nd QTR
1.84
2.27
2.4
2.56
2.3
1.46
3.29
2012 3rd QTR
1.96
2.22
2.33
2.59
2.28
1.27
3.24
2012 4th QTR
2.14
2.21
2.43
2.55
2.39
1.53
3.36
2013 4th QTR
N/A
N/A
N/A
N/A
0.247
0.107
0.349
2013 1st QTR
2.1
2.15
2.38
2.51
2.3
1.28
2.95
2013 2nd QTR
N/A
1.99
2.3
2.57
2.34
1.88
3.07
2013 3rd QTR
2.19
2.18
2.39
2.68
2.5
1.59
3.07
2013 4th QTR
N/A
2.2
2.48
2.74
2.5
1.07
3.49
2014 4th QTR
N/A
N/A
N/A
N/A
0.264
0.107
0.352
2014 1st QTR
1.74
2.32
2.35
2.7
2.38
1.07
3.16
2014 2nd QTR
N/A
2.43
2.47
2.76
2.62
1.73
3.52
2014 3rd QTR
N/A
2.52
2.54
2.77
2.66
1.97
3.45
2014 4th QTR
N/A
2.43
2.54
2.79
2.69
1.94
3.52
2015 4th QTR
N/A
N/A
N/A
N/A
0.251
0.126
0.431
2015 1st QTR
N/A
1.99
2.45
2.66
2.5
1.69
3.35
2015 2nd QTR
1.48
2.4
2.5
2.85
2.54
1.34
4.31
2015 3rd QTR
1.26
2.04
2.71
3.05
2.55
1.26
3.66
2015 4th QTR
1.86
2.22
2.39
2.91
2.43
1.68
3.31
2016 4th QTR
N/A
N/A
N/A
N/A
0.258
0.081
0.378
2016 1st QTR
1.53
2.09
2.47
2.61
2.35
0.81
3.01
2016 2nd QTR
N/A
2.1
2.51
2.79
2.59
1.61
3.78
2016 3rd QTR
2.55
2.15
2.54
2.74
2.58
1.8
3.67
2016 4th QTR
1.8
2.34
2.42
2.76
2.57
1.65
3.24
2017 4th QTR
N/A
N/A
N/A
N/A
0.253
0.118
0.362
2017 1st QTR
N/A
2.21
2.33
2.82
2.61
1.6
3.3
2017 2nd QTR
N/A
2.09
2.31
2.71
2.39
1.72
2.91
2017 3rd QTR
1.18
2.43
2.45
2.84
2.59
1.18
3.51
2017 4th QTR
1.6
2.2
2.29
2.9
2.41
1.6
3.62
2018 4th QTR
N/A
N/A
N/A
N/A
0.261
0.135
0.365
2018 1st QTR
1.43
2.21
2.35
2.9
2.62
1.35
3.26
2018 2nd QTR
N/A
2.15
2.41
2.93
2.63
1.6
3.65
2018 3rd QTR
2.07
2.08
2.35
2.96
2.58
1.82
3.13
2018 4th QTR
2.18
2.39
2.49
2.69
2.5
1.84
3.21
2019 1st QTR
N/A
1.46
2.47
2.64
0.244
0.140
0.321
2019 2nd QTR
2.17
2.35
2.57
2.98
0.277
0.175
0.358
2019 3rd QTR
N/A
2.31
2.40
2.63
0.252
0.194
0.314
2019 4th QTR
N/A
N/A
N/A
N/A
0.241
0.155
0.337
Use the arrows to see agency values over time.

 

Allstate Agencies in the two smallest size groups realized a nice bump in value during the final quarter of 2018 due in large part to the presence of merger activity. Provided below is commentary for each size group as to the factors that influenced this quarter’s value:

$0 to $100,000 in New/Renewal Commission

All agencies financed in this size group by PPC LOAN in the fourth quarter of 2018 were part of a merger transaction. In 2017 and early 2018, the values of this size group struggled, realizing quarterly sales multiples of just 1.18, 1.60, and 1.43 times.

However, values increased in the 3rd Quarter of 2018 realizing an average multiple of 2.07 times. This trend was validated this quarter, as the average sales multiple hit 2.18 times this quarter. It will be interesting to watch how these sized agencies perform from a value perspective on a going forward basis, but the ability to merge smaller sized agencies appears to be a key component to healthy values for this size group.

$100,000 to $200,000 in New/Renewal Commission

The average sales multiple for this size group increased to 2.39 times this quarter, a significant increase after experiencing a 2.08 times multiple in the Third Quarter of 2018. Twenty-five percent of the agencies in this size group were part of a merger transaction. It is also worth noting that all mergers were executed by an existing agency owner. The break down between merged agencies and those sold as a stand-alone location for this quarter are as follows:

Agencies in this size group are on an upward trend; however, the presence of merger opportunities drove these sized values to realize an increase of 15% over the last quarter.   Given the mature nature of the buy / sell market for Allstate agencies, a 15% bump in a single quarter is a significant event.  It will be interesting to watch how these sized agencies perform from a value perspective on a going forward basis. 

$200,000 to $300,000 in New/Renewal Commission

Agencies in this size group realized a nice multiple increase from 2.35 times in the third quarter of 2018 to 2.49 times in the final quarter of 2018. This is extremely impressive as no agencies in this size group were sold as part of a merger transaction.

In fact, the 2.49 times sales multiple has not been realized for this size group since the 3rd quarter of 2016, when agencies between $2million and $3million in earned premium realized an average sales multiple of 2.54 times.

$300,000+ in New/Renewal Commission

In a rare occurrence, agencies in the largest size group saw their average sales multiple drop below 2.70 times. This is the first such instance since the first quarter of 2016 when agencies in this size group realized a value of just 2.61. The driving factors for this drop in value can be summarized by the following:

  • There was a single large sized agency that sold for a little more than TPP due to the termination of the seller.
  • Three large sized agencies sold for less than 2.50X (a very rare occurrence for this size group)

In each of the first three quarters of the year this size group realized an average sales multiple of 2.90 or greater. There is no evidence to suspect this quarter’s decrease is anything more than an anomaly. This quarter’s value swing for large sized agencies demands we keep a close eye on their values as we move into 2019.

New Jersey 2018 Values

PPC LOAN has been involved in quite a few New Jersey transactions in 2018, therefore; we have enough data to release these updated statistics for 2018. First, it is important to note that Allstate New Jersey is a separate company from Allstate Insurance, and that Agents have a compensation model which pays a base commission rate of 6.5% with an opportunity to make well over 10%.

Below is an overview of the characteristics of New Jersey Agencies PPC LOAN approved in 2018:

  • Average 12 Month Moving Earned Premiums = $5,076,957
  • 12 Month Renewal Commission Income = $517,850
  • Average Commission Percentage = 10.2%
  • Average Sales Price = $1,072,500
  • Sales Multiple of Renewal Commission Revenues = 2.07X

In general, New Jersey agencies are very profitable to the owner due primarily to large average customer premiums. The sales multiples in New Jersey are below what we see in the rest of the country, and this is primarily due to the wide range commission scale which starts at a base compensation of 6.5%. The sales multiples in New Jersey clearly back the theory that guaranteed renewal income holds a greater value over contingent or transactional compensation.

 

Percentage of Agency Sales by Size Group
$0 to $100,000
$100,001 to $200,000
$200,001 to $300,000
$300,001 and up
2007 1st QTR
N/A
N/A
N/A
N/A
2007 2nd QTR
N/A
N/A
N/A
N/A
2007 3rd QTR
N/A
N/A
N/A
N/A
2007 4th QTR
N/A
N/A
N/A
N/A
2008 1st QTR
N/A
N/A
N/A
N/A
2008 2nd QTR
N/A
N/A
N/A
N/A
2008 3rd QTR
N/A
N/A
N/A
N/A
2008 4th QTR
N/A
N/A
N/A
N/A
2009 1st QTR
N/A
N/A
N/A
N/A
2009 2nd QTR
N/A
N/A
N/A
N/A
2009 3rd QTR
N/A
N/A
N/A
N/A
2009 4th QTR
N/A
N/A
N/A
N/A
2010 1st QTR
N/A
N/A
N/A
N/A
2010 2nd QTR
N/A
N/A
N/A
N/A
2010 3rd QTR
N/A
N/A
N/A
N/A
2010 4th QTR
N/A
N/A
N/A
N/A
2011 1st QTR
N/A
N/A
N/A
N/A
2011 2nd QTR
N/A
N/A
N/A
N/A
2011 3rd QTR
N/A
N/A
N/A
N/A
2011 4th QTR
N/A
N/A
N/A
N/A
2012 1st QTR
N/A
N/A
N/A
N/A
2012 2nd QTR
N/A
N/A
N/A
N/A
2012 3rd QTR
N/A
N/A
N/A
N/A
2012 4th QTR
N/A
N/A
N/A
N/A
2013 1st QTR
17%
28%
27%
28%
2013 2nd QTR
N/A
21%
38%
41%
2013 3rd QTR
7%
15%
26%
52%
2013 4th QTR
N/A
25%
42%
33%
2014 1st QTR
6%
15%
58%
21%
2014 2nd QTR
N/A
17%
29%
54%
2014 3rd QTR
N/A
5%
43%
52%
2014 4th QTR
N/A
3%
36%
61%
2015 1st QTR
N/A
12%
41%
47%
2015 2nd QTR
4%
22%
44%
30%
2015 3rd QTR
5%
32%
27%
36%
2015 4th QTR
14%
31%
24%
31%
2016 1st QTR
9%
31%
24%
31%
2016 2nd QTR
N/A
14%
35%
51%
2016 3rd QTR
3%
13%
41%
45%
2016 4th QTR
4%
17%
22%
57%
2017 1st QTR
N/A
17%
22%
61%
2017 2nd QTR
N/A
21%
47%
32%
2017 3rd QTR
4%
25%
21%
50%
2017 4th QTR
4%
24%
44%
28%
2018 1st QTR
11%
17%
11%
61%
2018 2nd QTR
N/A
20%
28%
52%
2018 3rd QTR
5%
16%
32%
47%
2018 4th QTR
4%
32%
36%
28%
Use the arrows to see agency values over time.

 

The Allstate buy/sell market in the fourth quarter of 2018 was dominated by agencies with over $1 million in earned premium. Agencies with over $1 million in earned premium represented 96% of the agencies financed by PPC LOAN. The split between the three largest sized groups was very even, resulting in very reliable sales multiple results for each of these size groups.

 

Allstate Agency Value Ratios
Agency Price to New/Renewal Commissions
Agency Price to Total Revenues
2007 1st QTR
2.95
2.37
2007 2nd QTR
2.74
2.39
2007 3rd QTR
2.75
2.35
2007 4th QTR
2.49
2.18
2008 1st QTR
2.95
2.38
2008 2nd QTR
2.74
2.39
2008 3rd QTR
2.75
2.35
2008 4th QTR
2.49
2.18
2009 1st QTR
2.65
2.28
2009 2nd QTR
2.5
2.22
2009 3rd QTR
2.42
2.17
2009 4th QTR
2.37
2.17
2010 1st QTR
2.39
2.08
2010 2nd QTR
2.37
2.09
2010 3rd QTR
2.43
2.13
2010 4th QTR
2.41
2.09
2011 1st QTR
2.47
2.18
2011 2nd QTR
2.33
2.05
2011 3rd QTR
2.25
2
2011 4th QTR
2.3
2.06
2012 1st QTR
2.3
2.02
2012 2nd QTR
2.32
2.05
2012 3rd QTR
2.28
2.05
2012 4th QTR
2.39
2.11
2013 1st QTR
2.3
2.06
2013 2nd QTR
2.33
2.11
2013 3rd QTR
2.5
2.21
2013 4th QTR
2.5
2.19
2014 1st QTR
2.38
2.17
2014 2nd QTR
2.62
2.28
2014 3rd QTR
2.66
2.31
2014 4th QTR
2.69
2.32
2015 1st QTR
2.5
2.19
2015 2nd QTR
2.54
2.21
2015 3rd QTR
2.55
2.24
2015 4th QTR
2.43
2.14
2016 1st QTR
2.35
2.06
2016 2nd QTR
2.59
2.32
2016 3rd QTR
2.58
2.4
2016 4th QTR
2.57
2.37
2017 1st QTR
2.61
2.35
2017 2nd QTR
2.39
2.18
2017 3rd QTR
2.59
2.35
2017 4th QTR
2.41
2.22
2018 1st QTR
2.62
2.4
2018 2nd QTR
2.63
2.35
2018 3rd QTR
2.58
2.21
2018 4th QTR
2.5
2.34
Use the arrows to see agency values over time.

 

For those agency owners residing in a state where a good portion of the homeowners insurance is written through a third party brokerage company (primarily coastal counties), looking at the multiple of revenues may be your best measuring stick for agency value as it takes into consideration both Allstate and brokered (i.e. non-Allstate) revenues. Certainly, the brokerage book is a reliable source of renewal income and has a level of value that is not presented in the traditional multiple applicable to Allstate commissions.