Digital Dealer - September 2017 - 42

FINANCE & INSURANCE

By Ryan Kerrigan
Managing Director,
Kerrigan Advisors

A Fresh Look at Valuing
Reinsurance Cash Streams
Finance and insurance (F&I),
and associated reinsurance
programs, have long played an
important role in the profitability of
the dealership model. These service
lines provide a consistent flow of
gross margin (often routed outside
of the dealership P&L statement, or
"off-statement") and deferred
income in the case of earned
reinsurance premiums. These profit
centers are being more actively
assessed in the buy/sell process,
and sellers are increasingly gaining
value for these cash flows.
A LOOK BACK

Historically, when buy/sells
were most commonly transacted

between relatively small dealer
groups, or individual operators, the
profits associated with reinsurance
programs were largely ignored.
That is not to say the profits were
not real, or not material. Dealers
have long known the earnings
potential of successfully managed
reinsurance programs. But, in
the context of the buy/sell, these
off-statement earnings were often
not calculated into dealership
profits. Sellers generally retained
these entities and allowed the
reinsurance programs to "run off,"
and collecting the cash flows as the
programs wound down.
I suspect the reason that

reinsurance was treated in this
manner was the heterogeneity of
the marketplace. Buyers and sellers
were rarely using the same types
of programs, so buyers viewed the
opportunity through their own
lens, and did not seriously evaluate
the programs put in place by the
seller. And, many sellers may
have reasoned that they would
receive cash flows as their program
wound down, so there was no
need to include this in the buy/sell
negotiation.
Additionally, there is also the
time lag associated with seeding
a reinsurance program before it
Continued on pg. 44

...BUYERS VIEWED THE OPPORTUNITY
THROUGH THEIR OWN LENS, AND DID NOT
SERIOUSLY EVALUATE THE PROGRAMS PUT IN
PLACE BY THE SELLER.

42

SEPTEMBER 2017

D I G I TA L D E A L E R . C O M


http://www.DIGITALDEALER.COM

Table of Contents for the Digital Edition of Digital Dealer - September 2017

Digital Dealer - September 2017
Contents
Learning from Bad Examples
Increasing Leadership Effectiveness: It’s Simple (but Not Necessarily Easy)!
Out-Think, Don’t Out-Spend Your Competition
Great Possibilities Occur When Your Team Members Become Engaged
Your BRAND is Either Growing… or You’re Going!
BRIAN BENSTOCK GM & VP, Paragon Honda & Paragon Acura
SPECIAL SECTION: Digital Dealer 23 Show Highlights: Top Sessions, Keynotes, Exhibitor Listings, Summary Agenda, & Restaurants in Vegas
Letter from the Show Director
12 Questions to Answer for Social Media Success
Make It Happen, Watch It Happen, Wonder What the Hell Happened!
What Ever Happened to the Salesto- Service Introduction?
A Fresh Look at Valuing Reinsurance Cash Streams
Digital Dealer - September 2017 - Digital Dealer - September 2017
Digital Dealer - September 2017 - Cover2
Digital Dealer - September 2017 - 1
Digital Dealer - September 2017 - Contents
Digital Dealer - September 2017 - 3
Digital Dealer - September 2017 - Learning from Bad Examples
Digital Dealer - September 2017 - 5
Digital Dealer - September 2017 - 6
Digital Dealer - September 2017 - 7
Digital Dealer - September 2017 - Increasing Leadership Effectiveness: It’s Simple (but Not Necessarily Easy)!
Digital Dealer - September 2017 - 9
Digital Dealer - September 2017 - 10
Digital Dealer - September 2017 - 11
Digital Dealer - September 2017 - Out-Think, Don’t Out-Spend Your Competition
Digital Dealer - September 2017 - 13
Digital Dealer - September 2017 - Great Possibilities Occur When Your Team Members Become Engaged
Digital Dealer - September 2017 - 15
Digital Dealer - September 2017 - 16
Digital Dealer - September 2017 - 17
Digital Dealer - September 2017 - Your BRAND is Either Growing… or You’re Going!
Digital Dealer - September 2017 - 19
Digital Dealer - September 2017 - BRIAN BENSTOCK GM & VP, Paragon Honda & Paragon Acura
Digital Dealer - September 2017 - 21
Digital Dealer - September 2017 - 22
Digital Dealer - September 2017 - 23
Digital Dealer - September 2017 - SPECIAL SECTION: Digital Dealer 23 Show Highlights: Top Sessions, Keynotes, Exhibitor Listings, Summary Agenda, & Restaurants in Vegas
Digital Dealer - September 2017 - 25
Digital Dealer - September 2017 - Letter from the Show Director
Digital Dealer - September 2017 - 27
Digital Dealer - September 2017 - 28
Digital Dealer - September 2017 - 29
Digital Dealer - September 2017 - 30
Digital Dealer - September 2017 - 31
Digital Dealer - September 2017 - 32
Digital Dealer - September 2017 - 33
Digital Dealer - September 2017 - 34
Digital Dealer - September 2017 - 35
Digital Dealer - September 2017 - 12 Questions to Answer for Social Media Success
Digital Dealer - September 2017 - 37
Digital Dealer - September 2017 - Make It Happen, Watch It Happen, Wonder What the Hell Happened!
Digital Dealer - September 2017 - 39
Digital Dealer - September 2017 - What Ever Happened to the Salesto- Service Introduction?
Digital Dealer - September 2017 - 41
Digital Dealer - September 2017 - A Fresh Look at Valuing Reinsurance Cash Streams
Digital Dealer - September 2017 - 43
Digital Dealer - September 2017 - 44
Digital Dealer - September 2017 - 45
Digital Dealer - September 2017 - 46
Digital Dealer - September 2017 - 47
Digital Dealer - September 2017 - 48
Digital Dealer - September 2017 - 49
Digital Dealer - September 2017 - 50
Digital Dealer - September 2017 - 51
Digital Dealer - September 2017 - 54
Digital Dealer - September 2017 - Cover3
Digital Dealer - September 2017 - Cover4
https://www.nxtbook.com/nxtbooks/digitaldealer/202004
https://www.nxtbook.com/nxtbooks/digitaldealer/202003
https://www.nxtbook.com/nxtbooks/digitaldealer/202002
https://www.nxtbook.com/nxtbooks/digitaldealer/202001
https://www.nxtbook.com/nxtbooks/digitaldealer/201912
https://www.nxtbook.com/nxtbooks/digitaldealer/201911
https://www.nxtbook.com/nxtbooks/digitaldealer/201910
https://www.nxtbook.com/nxtbooks/digitaldealer/201909
https://www.nxtbook.com/nxtbooks/digitaldealer/201908
https://www.nxtbook.com/nxtbooks/digitaldealer/201907
https://www.nxtbook.com/nxtbooks/digitaldealer/201906
https://www.nxtbook.com/nxtbooks/digitaldealer/201905
https://www.nxtbook.com/nxtbooks/digitaldealer/dd26showdirectory_042019
https://www.nxtbook.com/nxtbooks/digitaldealer/201904
https://www.nxtbook.com/nxtbooks/digitaldealer/201903
https://www.nxtbook.com/nxtbooks/digitaldealer/201902
https://www.nxtbook.com/nxtbooks/digitaldealer/201901
https://www.nxtbook.com/nxtbooks/digitaldealer/201812
https://www.nxtbook.com/nxtbooks/digitaldealer/201811
https://www.nxtbook.com/nxtbooks/digitaldealer/201810
https://www.nxtbook.com/nxtbooks/digitaldealer/201809
https://www.nxtbook.com/nxtbooks/digitaldealer/201808
https://www.nxtbook.com/nxtbooks/digitaldealer/201807
https://www.nxtbook.com/nxtbooks/digitaldealer/201806
https://www.nxtbook.com/nxtbooks/digitaldealer/201805
https://www.nxtbook.com/nxtbooks/digitaldealer/201804
https://www.nxtbook.com/nxtbooks/digitaldealer/201803
https://www.nxtbook.com/nxtbooks/digitaldealer/201802
https://www.nxtbook.com/nxtbooks/digitaldealer/201801
https://www.nxtbook.com/nxtbooks/digitaldealer/201712
https://www.nxtbook.com/nxtbooks/digitaldealer/201711
https://www.nxtbook.com/nxtbooks/digitaldealer/201710
https://www.nxtbook.com/nxtbooks/digitaldealer/201709
https://www.nxtbook.com/nxtbooks/digitaldealer/201708
https://www.nxtbookmedia.com