Insurance

We have a long history of working with insurance clients ranging from family-owned agencies to large, private equity sponsored brokerages. Our broker clients include retail, wholesale, MGAs, and MGUs. We have worked with both publicly traded multi-line carriers and closely held specialty underwriters. Our services include independent valuations for corporate transactions, agency perpetuation, buy-sell agreements, financial reporting, tax compliance, and buy or sell side consulting services. We have also completed fairness and solvency opinions involving insurance companies. Members of Mercer Capital’s Insurance Industry Team also regularly speak and write on insurance industry topics, including publication of our quarterly newsletter Value Focus: Industry Industry which tracks insurance industry themes and valuation metrics.

While both operate within the insurance ecosystem, agencies and underwriters are fundamentally different businesses, and their valuation drivers reflect those distinctions. Insurance agencies (also called brokerages) are distribution businesses that earn revenue primarily through commissions and fees tied to policy sales and renewals. Their value is driven by recurring revenue, client retention, carrier relationships, producer performance, and organic growth. Risk exposure is generally limited, which means cash flows are relatively stable and predictable. In contrast, insurance underwriters (also called carriers) assume policy risk directly. Their valuation involves analyzing reserves, loss ratios, investment portfolios, regulatory capital, and underwriting performance. Market value is often linked to book value and return on equity rather than multiples of revenue or earnings.

Mercer Capital has over 35 years of experience providing business valuation and transaction advisory services to multiple segments in this industry:

• Agencies
  • Independent insurance brokers and agents
  • Bank-owned agencies
  • Retail, wholesale, and MGAs
• Underwriters
  • P&C, life & health, and managed care
  • Reinsurance
  • Captives and risk retention groups
• Ancillary
  • Third-party administrators
  • Claims adjusters and other service providers
• Mercer Capital Experience
  • Nationwide client base
  • Agency clients range from single office agencies to top-10 public brokers
  • Underwriter clients range from monoline privates to publicly traded multi-line carriers

We typically request three to five years of financial statements and tax returns, along with key operational data on customer/carrier mix, client retention, management/producer compensation, and combined ratio trends (for underwriters). Understanding your book of business, revenue composition, and growth drivers allows us to identify the factors that influence cash flow, risk, and growth.

Valuation fees generally depend on the scope and purpose of the engagement. Pricing reflects modeling complexity, availability and quality of information, company/transaction size, related review scrutiny/documentation requirements, and timing (normal timeline vs. accelerated deadline). A more limited-scope analysis might be suitable for planning or internal use, while a full valuation report offers a comprehensive opinion appropriate for financial reporting, tax, litigation, or transaction contexts. Mercer Capital provides a clear engagement proposal upfront so clients can select the level of service that best fits their objectives.

Once we have all the necessary information, most valuations are completed within 4-6 weeks, although expedited services are available. The timeline is somewhat dependent on management data readiness, modeling complexity, and entity complexity. Our process emphasizes both efficiency and rigor to ensure our conclusions are well-supported and defensible for your intended purpose. For insurance valuations in the context of financial reporting, the audit review timeline is largely dependent on the procedures of the audit team/specialists. However, delivery of an “audit ready” work product greatly accelerates this process.