Exploiting Risk Woody Ratterman, III Sr. Vice President Marsh, Berry & Company, Inc

Transcription

1 Exploiting Risk Woody Ratterman, III Sr. Vice President Marsh, Berry & Company, Inc transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.

2 MarshBerry Services Information Services Management Consulting Exchange Networks M&A Advisory Benchmarking Services Perspectives for High Performance (PHP) Sales Tracking, Accountability and Results (STAR) Confidential Employee Morale Survey Services, Tracking and Timeline Updating System (STATUS) MarshBerry.com Performance Calculators Forms & Documents Position Descriptions Discussion Groups Research Studies Market Data On-Line Value Estimator Published Articles The MarshBerry Letter Monthly Publication Surveys a. Market & Financial b. Agency Compensation c. Agency Operations For The Record Monthly Publication Statistical Analysis Public Speaking Engagements Keynote/State of the Industry Topical education Carrier Services Distribution System Management Field Personnel Training and Development Agency Management Symposiums Sales Management Strategies Cultural Alignment Operational Guidelines Producer Coaching Sales Manager Training Value Added Platform Construction Business Planning Corporate Strategy Execution Procedures Strategic Options Analysis Perpetuation Plans Agency Valuation Services Perpetuation Planning Transfer a. Stock b. Leadership c. Books of Business Financial Consulting Financial Controls Compensation Consulting Value Enhancement Planning Operational Consulting Workflow and Procedures E&O Audit, Policies and Procedures E&O Market Access Customer Service Goal Setting Recruiting Position profile, search, screen, hire Compensation development plan Technical and sales training year one Agency Peak Performance EXchange (APPEX) Over 120 Agencies Over $1.0 Billion Revenue Bank Agency NetworK (BANK) Over 25 Banks Over $980 Million Revenue Total Agency Sales Culture (TASC) Network Over 40 Agencies Over $1.2 Billion Revenue Nation s leading organic growth agencies Enhanced new business production and retention strategies Standard Partner Services Peer Exchange / Networking Semi-annual Conferences Benchmarking Services MarshBerry.com MarshBerry Letter Priority Consulting Opportunities Exclusive Programs Distance Learning Groups (DLG s) Deal Process Acquisition Planning Buy/Seller Representation Agency Search and Screen Agency Fair Market Valuation Deal Benchmarking Deal Execution Transaction Negotiation Letter of Intent Development Cross-Marketing Analysis IRR, ROI, EPS Analysis Intangible Asset Allocation Diagnostic Due Diligence Confirmatory Due Diligence Fairness Opinion Contract Recommendations Post-Closing Management Goodwill Impairment Post-Deal Integration Operational Consulting Incentive Compensation transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 1

3 Changing M&A Market What Happened to all the Buyers? transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 2

4 Transaction Activity Estimates Number of Closed Deals By Segment BANKS Public Brokers Agencies Source: MarshBerry, SNL Financial transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 3

5 The Hockey Stick has Snapped Agency Deals as Multiple of EBITDA Public Brokers PEGs Banks ? Information considered in preparing estimated market comparables includes private transactions in which we were involved and have detailed information, private transactions from which we have general knowledge, transactions in the public record, our knowledge of the current M&A marketplace, discussions with buyers and sellers that are active in the marketplace and MarshBerry estimates. Value illustrated is net of WC requirement. transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 4

6 Enterprise Value Comparables Including Earn Out Yesterday: : Comparable Information considered in preparing estimated market comparables includes private transactions in which we were involved and have detailed information, private transactions from which we have general knowledge, transactions in the public record, our knowledge of the current M&A marketplace, and discussions with buyers and sellers that are active in the marketplace. Value illustrated is net of WC requirement. transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 5

7 Enterprise Value Comparables Guaranteed Yesterday: : Information considered in preparing estimated market comparables includes private transactions in which we were involved and have detailed information, private transactions from which we have general knowledge, transactions in the public record, our knowledge of the current M&A marketplace, and discussions with buyers and sellers that are active in the marketplace. Value illustrated is net of WC requirement. transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 6

8 Organic Growth Versus Agency Value Including Earn Out EBITDA Multiple.. Post Closing Growth Rate in EBITDA transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 7

9 Continuing Consolidation The U.S. Insurance Broker Marketplace Comm. Rev. Size Million Million Million 939 1,115 1,371 1, Million 1,985 1,957 1,949 1, Million 4,094 3,482 2,988 2, Million 5,587 4,804 2,704 1,532 Total 12,816 11,675 9,462 8,183 Under 0.5 Million 25,754 18,601 9,474 3,507 Total 38,570 30,276 18,936 11,690 transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 8

10 Financial Institutions In Insurance Facing the Fork in the Road 1. BNC Corp 2. Bank of America 3. Webster 4. Commerce 5. Citizens of RI 6. Capital One Over $250 M Revenue transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc.

11 Financial Institutions: Fewer Buying Fewer Non-performing assets Posting loan loss reserves Financial Institution capital melt down Relative size / Market confusion Non-amortizable intangibles Gunpowder talk Footprint reality Back to core business talk Value relative to cost basis transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 10

12 Insurance Agency Dynamics transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 11

13 Average Insurance Benchmarks Revenue Size $1.6 million $2.5 million $5.0 million Mix of Business: Personal 32% 30% 20% Commercial 68% 70% 80% Premiums: $10.8 million $16.2 million $35.4 million Customers Counts: Personal 2,231 2,800 3,374 Commercial 858 1,001 1,679 Average Account Size (revenue): Personal $198 $234 $268 Commercial $1,737 $2,098 $2,618 transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 12

14 Average Insurance Benchmarks Revenue Size $1.6 million $2.5 million $5.0 million Staffing: Production Service/Support Total Productivity: Revenue Per EE $112,000 $123,000 $137,000 Growth Rates: Personal 3.4% 3.4% -0.6% Commercial 4.1% 4.0% -1.3% Life & Health 2.9% 6.8% 11.9% transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 13

15 Key Success Factors Financial incentive for commitment by both parties Incentive for financial institution referrals warm referrals Incentive for agency s producers Financial institution marketing Insurance availability - Announcement Education of financial institution relationship managers CEO commitment transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 14

16 Financial Institutions Insurance Strategy transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 15

17 Case Study: The 80% / 9% rule $40 M in Commission Revenue, 9.7% Growth 20.5% Profit Excluding Other Income, 27.7% Total Profit 140% 120% 100% 80% 60% 40% 20% 0% % Revenue % Accounts Profit Margin Growth Rate Personal Lines 8% 53% 32% 3% Small Group 3% 20% 10% 91% High 30% Margin 3% Small Commercial 9% 28% 25% 2% Large Group 12% 80% 2% 9% 27% 18% Large Commercial 68% 7% 17% 14% Low Growth transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 16

18 Strategy of Leading Financial Institutions In Insurance Acquire Strategic and Financial Goals Trusted Advisor Position Non-Interest Income Wallet Share Earnings Per-Share Leverage Integrate transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 17

19 MarshBerry Market Position Information Services #1 Insurance Industry Information Resource Proprietary benchmark statistics on over $4.5 billion of aggregate brokerage revenue. Used by brokers, insurance carriers, financial institutions, private equity firms and others Management Consulting #1 Insurance Industry Management Consulting Firm Financial, operational and sales management consulting services to over 900 agents, brokers, companies and financial institutions Exchange Networks #1 Insurance Industry Exchange Network Management Ow n and operate 3 best practices exchange netw orks comprised of over 175 agencies and brokers representing more than $3 B in aggregate revenue and $27 B in premium M&A Advisory #1 Insurance Industry M&A Advisory Firm Over 231 Transactions w ith Top 100 Brokers 140 Bank Insurance transactions Over 555 total transactions closed Ranked #1 by SNL over past 8 years transmitted by any means, electronic or mechanical, without prior written permission of Marsh, Berry & Company, Inc. 18