Profit Participation

Custom reinsurance strategies that enhance dealer impact from EFG

Your business is unique — and so are your reinsurance needs. That’s why EFG takes a custom approach to developing and managing your own reinsurance strategy. Each EFG reinsurance solution is underwritten by A.M. Best A-rated insurance companies and is designed especially for each dealer, lender, and agent we serve. By equipping our client partners with the tools to share in the profitability of the consumer protection solutions they sell, EFG has helped them earn millions in reinsurance profits. Our broad portfolio of services includes:

  • Formation of profit participation programs from the ground up
  • Establishing reinsurance companies in offshore jurisdictions to control administrative costs
  • Expert administration and accounting
  • Strategic investments
  • Corporate and client reporting, financials, and coordination of tax returns
  • Access to other producer participation programs
  • Integration of taxable or municipal bond fund options with custodial accounts

Profit participation programs

EFG’s profit participation programs allow dealers, lenders, and agents to either:

  • Establish their own insurance companies for maximum profitability and tax benefits, or…
  • Earn a percentage of underwriting profits without assuming risk.

By directing all or part of the premiums generated from consumer protection products back into their businesses, our clients are better positioned to build wealth over the long term and enhance dealer impact. With over three decades of industry insight, EFG Companies is a leader in the creation and management of these programs.

Reinsurance vs. retrospective agreements

While the term “reinsurance” is commonly used to refer to both reinsurance and retrospective structures, it’s important to understand the difference. EFG offers two kinds of profit participation plans:

Reinsurance plans increase dealer impact
The reinsurance concept allows the dealer, lender, or agent to own and control their own insurance company, which accepts premiums generated from vehicle service agreements and other aftermarket products. These companies are known as producer-owned reinsurance companies (PORC) or producer-affiliated reinsurance companies (PARC). The insurance company holds the premium reserves and earns all of the underwriting profits, plus investment income from these premiums. These profits can be withdrawn monthly to provide working capital or create long-term wealth.

Retrospective plans increase dealer impact
The retrospective concept allows the owner to participate in a portion of the underwriting profits while assuming no risk. The administrator holds the premiums and allows the dealer, lender, or agent to take up to 80 percent of the underwriting profits on scheduled payout dates as long as the portfolio is performing. Unlike a PORC or PARC, there are no annual fees or tax preparation required for a retro agreement.

Take ownership of your profitability

For years, the concept of profit participation programs has been gaining momentum among dealers, lenders, and agents. It’s also been earning accolades in the industry as a smart way to increase profitability while reducing your risk. In fact, in a 2003 Automotive News article detailing the collapse of a major service contract provider, the author stated that those who had their own reinsurance companies had their funds available to pay claims, while others with no backup funding generally had to eat those costs. This is a powerful example of the financial security that profit participation programs can provide. And with EFG Companies as your partner, that’s just the beginning.