What do you think of the life insurance space?

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April 27, 2024

by a searcher from University of North Texas in Dallas, TX, USA

What do you guys think about a roll up in the life insurance space?

It has over 1 trillion in annual revenue and over 6700 companies

they have about 99% of the market share that has no been consolidated

they have an average of 22% net profit margins

What kind of factors do you guys weigh in account to decide on an industry?

What are some good industries to pursue for a rollup?

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Reply by a searcher
from Brigham Young University in Lehi, UT, USA
I've got the same question as @Brad Hettich. Two completely different business types. I can speak to the broker side of things if that's what you are considering. There are not many life insurance brokers that just do life insurance. Most of the people I come across selling just life insurance are working as a captive agent for a large life insurance company. The ones that are independent brokers are often also selling employee benefits and home/auto/umbrella. Life insurance often pays high first year commissions and lower renewals, vs benefits and property/casualty often pay the same recurring splits every year. Because there is little recurring revenue, unless the broker has built out specialty tech/processes that allow anyone to easily generate new business, the value of the business will be pretty small. There could be a roll up play if you find the right platform agency that is a new business machine. The roll up space for property/casualty agencies has been very hot the past 5 years. Very difficult to compete against multi-billion dollar private equity buyers in the space, but I don't think those buyers have been as interested in the life space.
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Reply by a searcher
from Northwestern University in Chicago, IL, USA
Wanted to go after the insurance brokerage space (with a whole value creation thesis), but the reality is private equity learned this was an attractive business model 20 years ago so my investors STRONGLY encouraged me to not go after the space.

The multiples are high and the owners know their businesses are valuable if they have any scale at all.

That said you could probably buy a list and do moderate scale outreach pretty cheap, so if you are super curious, wouldn't take that much time or energy investment. To get a few phone calls.
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