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...te premium. The premium is then an class='cm-highlight'>discountedan> to recognize the time value of mon...nizational suitability. Reproduced an class='cm-highlight'>withan> permission from riskVue, a free monthly online magazine for risk and insurance professionals.

... values) or a flat amount. The insurer assumes the loss obligations covered under the policy. In some circumstances, guaranteed cost can be the best of all worlds. A specially tailored program can use an insured's expected losses to calculate premium. The premium is then an class='cm-highlight'>discountedan> to recognize the time value of money. Insurer calculations include a risk charge for large losses and the possibility that losses might exceed projections. Many buyers like the fact that guaranteed cost programs pose no upside risk (i.e., no additional premium or cost for ... alternative risk financing?" Size isn't very important. The main criterion is losses. As a rule of thumb, alternative risk financing requires approximately $500,000 in annual incurred losses in one line of insurance — for example, Auto, General Liability, or an class='cm-highlight'>Workersan> an class='cm-highlight'>Compensationan>. Losses in this line should be reasonably predictable, and the firm should be reasonably able to accept risk. Internal management discipline and a willingness to commit the appropriate resources are also required. The losses should have these characteristics: Reasonably predictable Not extremely volatile ... exposed to a catastrophic loss High frequency and low severity "High frequency and low severity" means that the number of losses should be at least several dozen per year, of which most are less than $50,000. As a case in point, a large hotel would probably experience many small an class='cm-highlight'>Workersan> an class='cm-highlight'>Compensationan> claims but relatively few, if any, large claims. A bank can also expect to have numerous low severity Comp claims. Alternative risk financing usually involves loss severity — the exposure to large losses — by purchasing excess ...

...ty to purchase junior stock for an class='cm-highlight'>discountedan> value which will become convertible...he will be sorely missed. Reproduced, an class='cm-highlight'>withan> permission, from The Middleton Lett...

...ns derived from one line, such as an class='cm-highlight'>Workersan> an class='cm-highlight'>Compensationan>. Agencies that have at least 25% o...nsurance markets is also a negative. an class='cm-highlight'>Withan> enough time (usually five years), agency principals can develop and carry out a plan to make the firm significantly more attractive to potential buyers. The picture that's presented can mean the difference between a value of 1 X revenues and 1.5 X revenues, or even more. The late Carol Hammes, principal of The Middleton Group, was one of the Independent Agency System’s most widely respected management consultants. She will be sorely missed.

... the appraisal should have been an class='cm-highlight'>discountedan> to account for the ESOP's purchasin... suppliers? How are the relationships an class='cm-highlight'>withan> the suppliers? 7. Any environmental issues that can affect the business? Any government regulations? 8. What are the company's strengths and weaknesses? Any patents or special trade secrets? What makes the company different from others? How does the company get prospective customers or clients? 9. Labor force-Any unions, commission salesmen, labor contracts, etc. C. PROJECTIONS 1. Based on the key factors identified, how will the projections change if any of these factors change? a. Identify the assumptions implicit in the projections The sales breakdown by divisions and product lines in terms of dollars and units of sales Economy will improve, get worse, etc. Capacity expansion requirement (e.g. more space, technicians, salespeople), competition, etc. The real growth rate and any increase in market share Price increase (i.e. inflation), profit margin, etc. Technological competitiveness and ability to supply new products demanded by the marketplace.

...ces a value of $1,029,412. an class='cm-highlight'>Discountedan> Future Earnings Method In this...isitions Employment contracts an class='cm-highlight'>withan> producers/staff Ability to configure client product needs Control of major accounts, by individuals Controlled business of the agency (The insured businesses are owned by the agent or a family member.) Dependence on a specific industry for revenue Status of any litigation involving the agency IRS actions, if any, against the agency Litigation involving key agency personnel <

...al and long-time client, beginning an class='cm-highlight'>withan> a personal delivery of the policy ...n, of course. Would that be all right an class='cm-highlight'>withan> you?' Th