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... to handle medium-size to large commercial referrals from the bank's loan offi... Letter, Volume XIII, No. 9. Inquiries and questions may be addressed to Carol...

... be appropriate to look at the entire book. When projecting growth in larger agencies or where there are significant differences in types of account, it's best to apply a separate growth rate to each of the elements being considered. One of the more common breakdowns is regular Commercial lines, small Commercial business, Personal lines, Group, Individual Life/Health, and contingents. Note that in some deals, contingents aren't included in the valuation process, and often the Individual Life insurance isn't even included in the purchase. The second element ... rollover bonuses, and investment income. Often prospective buyers include contingent income in the valuation process but usually at a five-year average. If the profit-sharing amounts have varied widely over the period, a prudent buyer would probably leave it out altogether. The seller is rarely given credit for the rollover bonuses that the buyer may receive from insurance companies as a result of the acquisition of the book, but this could be a point of negotiation. The disposition of contingents for the first year after the sale is also often part of the negotiating ... . After projecting the anticipated revenues, subtract operating and sales expenses-they will be under your ownership, and the result will be the estimated pretax profit. The preliminary discussions that you should have had with the sellers regarding their future compensation needs will be instrumental in determining these expenses. There also might be changes in employee benefit costs, sales and office payroll, dues and subscriptions, travel, entertainment, and automobiles. Generally the resulting pro forma pre-tax profit will be in a range of 15% to 25% of revenues. It ...

...s, short-term bank deposits, or commercial paper. Investors might get a better...t also be a charge for accounting fees and marketing costs, whic

... of economic uncertainty or to take advantage of high interest rates, investors can use the money-market fund as a place to put their nest egg until other investment vehicles become more attractive. Money-market fund managers invest in Treasury or other government securities, short-term bank deposits, or commercial paper. Investors might get a better rate of return at a bank or savings and loan by buying a certificate of deposit, but they would not be able to withdraw their money at any time, as they can with money-market funds. Money-market funds let investors ... primarily in securities issued or is guaranteed by the U.S. government, there is almost no risk. A fund that puts a large percentage of its assets into commercial paper might be slightly riskier. Commercial paper includes short-term, unsecured promissory notes from corporations to finance short-term credit needs. Once investors are satisfied with the safety of the fund, they will likely look at more mundane criteria to determine their choice. For example, if they are going to use the fund as a checking account, they will want to know how many ... write covered options on a majority of the portfolio. Sector Funds-These funds invest in a single industry or market sector. There is less diversity and more risk with this type of fund. Social-Action Funds-These funds are for people who want their investments to be consistent with their political beliefs. Funds of this kind will refrain from certain investments for political or social reasons. PROS Mutual funds offer many advantages, especially to the small investor. There are funds that can help investors achieve either their short-term or long-term financial goals and, ultimately, ...

...re common breakdowns is regular Commercial lines, small Commercial business, Personal lines, Group, In...his individual a combination of salary and results-oriented bonus based on a f...