A proper business valuation is backed with facts and figures that determine a company’s actual worth. Although insurance companies share several similarities with other types of business, they have operating processes and portfolio items that are unique to the industry. If you’re looking to find insurance agencies for sale in New York City, NY, it’s best to enlist the help of a professional who has experience in business valuations.
Different Types of Insurance Business Valuations
Combined Ratio
This is generally used to make a comparison of the incurred losses and expenses of an insurance company. The combined ratio allows you to determine a percentage of earned premiums. You’ll know that your prospective insurance business is operating at a profit if the combined ratio is under 100%.
Value of Assets
An asset refers to anything with economic value that a company owns. All assets, whether tangible or intangible, are reported on the company’s balance sheet.
Tangible assets may include supplies, cash, accounts receivable, vehicles, equipment, land, and buildings. Alternatively, intangible assets include intellectual property, goodwill, and customer perception.
Multiples of Earnings
If you need to value an insurance company that has shareholders, multiples of earnings per share of stock can help you. This is a representation of the earnings of every shareholder outside of any dividends. Keep in mind that earnings per share of stock are directly linked to business value.
To determine shareholder earnings, you’ll have to take interest and taxes out of net income. Next, you multiply that figure by the number of shares.
Cash Flow
The amount of money coming in and going out of a company over a set period is shown in a cash flow statement. Although these common accounting documents can be extremely useful when you’re trying to determine the company’s profitability, it has to be discounted to reflect the impact of the following:
- Amortization
- Depreciation
- Interest
- Taxes
Looking for Insurance Agencies for Sale in New York City, NY?
If you’re looking to buy an agency, the team of experts at Energia Consulting Partners, LLC can assist in finding the right opportunity and help secure appropriate financing needed to complete the purchase.