The purchase value for an insurance agency or brokerage firm is expected to drop in 2008 as soft market pressures and the supply and demand dynamics shift to benefit buyers, an agency consulting firm said.
Cleveland-based Marsh, Berry & Company Inc. released a 2008 state of the industry report that predicts prices for the majority of agencies and brokerage firms will begin to stabilize. The insurance market will see fewer buyers combined with an increase in the 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 average age of owners is in their mid-50s.
o Continued soft market conditions will hinder internal financial return expectations.
o There is an increased fear of capital gains increases with a new president.
o Agency values are falling.
The report noted that average agency or brokerage firm organic growth fell to around 3.7 percent; combine that with a slowing economy, and future earning growth for producers will become increasingly difficult.
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