The purchase value for an insurance agency or brokerage firm isexpected to drop in 2008 as soft market pressures and the supplyand demand dynamics shift to benefit buyers, an agency consultingfirm said.
|Cleveland-based Marsh, Berry & Company Inc. released a 2008state of the industry report that predicts prices for the majorityof agencies and brokerage firms will begin to stabilize. Theinsurance market will see fewer buyers combined with an increase inthe number of acquisition candidates, the report said.
|The supply of agencies will increase for several reasons,according to the report. Among the reasons are:
|o There is not broad ownership within agencies and the averageage of owners is in their mid-50s.
|o Continued soft market conditions will hinder internalfinancial return expectations.
|o There is an increased fear of capital gains increases with anew president.
|o Agency values are falling.
|The report noted that average agency or brokerage firm organicgrowth fell to around 3.7 percent; combine that with a slowingeconomy, and future earning growth for producers will becomeincreasingly difficult.
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