Allstate Agency Value Index- 2022 Q2

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Merger Activity Explodes!

Allstate Agency Price to 12MM Earned Premium Ratio (National Average)

$0 to $2,000,000 $2,000,001 to $4,000,000 $4,000,001 and up Simple Average Low High Average Earned Premium 2000 0.199 0.236 0.235 0.202 0.117 0.262 $1,127,399 2001 0.213 0.199 0.208 0.209 0.133 0.311 $1,410,751 2002 0.196 0.199 0.209 0.197 0.119 0.255 $1,715,574 2003 0.189 0.219 0.24 0.199 0.147 0.254 $1,801,519 2004 0.238 0.231 0.236 0.236 0.157 0.393 $1,507,155 2005 0.266 0.228 0.34 0.259 0.175 0.398 $2,305,537 2006 0.289 0.284 0.317 0.298 0.188 0.402 $2,518,924 2007 0.278 0.287 0.339 0.292 0.121 0.456 $2,564,973 2008 0.248 0.289 0.326 0.271 0.145 0.406 $2,249,764 2009 0.231 0.26 0.285 0.247 0.082 0.397 $2,127,297 2010 0.224 0.255 0.289 0.24 0.106 0.353 $2,167,574 2011 0.222 0.243 0.237 0.231 0.12 0.366 $2,206,584 2012 0.213 0.244 0.24 0.229 0.127 0.336 $2,342,175 2013 0.226 0.246 0.288 0.247 0.107 0.349 $2,781,745 2014 0.244 0.263 0.273 0.264 0.107 0.352 $3,263,288 2015 0.208 0.26 0.298 0.251 0.126 0.431 $2,798,118 2016 0.224 0.259 0.288 0.258 0.081 0.378 $3,247,073 2017 0.232 0.25 0.278 0.253 0.118 0.362 $3,099,030 2018 0.226 0.256 0.299 0.261 0.135 0.365 $3,202,644 2019 0.216 0.252 0.274 0.253 0.140 0.358 $3,638,959 2020 0.168 0.226 0.249 0.233 0.100 0.322 $4,102,072 2021 0.145 0.220 0.236 0.223 0.100 0.322 $4,264,462 2022 .192 .213 .228 .210 .130 .293 $3,331,831 2022 1st QTR 0.212 0.218 0.221 0.218 0.147 0.256 $3,168,816 2022 2nd QTR 0.176 0.212 0.230 0.208 0.130 0.293 $2,997,243

Use the arrows to see agency values over time.

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Let’s Talk Merger Statistics

In the last quarterly edition of the AAVI (Q1 2022), we mentioned that mergers represented 36% of transactions financed by PPC LOAN. This was up significantly from full year 2021, where just 3% of agency sales were a merger transaction.

Amazingly, 66% of the M&A transactions PPC LOAN financed in the Allstate space this quarter were part of a merger transaction. Due to this abundant sampling size of mergers, PPC LOAN is releasing the following statistics for mergers occurring in the 2nd quarter of 2022:

What are the big takeaways?

1. Existing agents are paying the same sales factor for a merger regardless of size:
This is a very interesting revelation, as historically speaking, the larger the agency the higher the sales multiple or factor. A $5 million earned premium agency always demanded a higher multiple than a $1.5 million agency.

The longstanding historical trend appears to have no relevance when the agency being purchased is being merged instead of being purchased by an outside buyer or maintained as a satellite.

2. Allstate Insurance Company is driving this trend:
It’s been a great plan for Allstate Insurance Company: Identify your best-performing agents based on various performance measurements. Label them Elite agents and give them a no strings attached right to purchase and merge within their geographic area.

From the agent’s perspective, they know what they need to do to achieve the desired status of Elite so they can grow their business through acquisition. From Allstate’s perspective, under performing agents have a viable window to get out, and top performing agents get bigger and more efficient.

What about the remaining 34% of acquisitions that were not a merger?

The remaining 34% of agency acquisitions financed by PPC LOAN were purchased by outside buyers. On average, these outside buyers purchased $3,977,529 in earned premium and purchased for an average sales factor of 0.231.