Your dealership is unique and so are your needs. Profit Strategies offers different vehicle service contract profit-participation solutions that are customized for every dealer. The vehicle service contract programs below are representative of “Administrator Obligor” and are fully insured by an A-rated insurance company.

For over 30 years Profit Strategies has provided unmatched service and support, helping dealers in earning millions of dollars in underwriting profits, through the formation of reinsurance companies or vehicle service contract ‘Retro” programs.

At Profit Strategies, we ensure that our clients are better positioned to build wealth over the long term. By creating a producer-owned reinsurance company, you are able to retain all of the underwriting profits and investment income that your dealership generates. You won’t be giving it all away to your current vehicle service contract company. This also provides for favorable tax benefits on the profits.

A dealer or producer-owned reinsurance company is a standalone C corporation that elects to be taxed in accordance with IRC section 831(b). This company will form a trust account of the purpose of accepting premiums and paying claims. It is completely separate from your dealership.

Premiums will be fully insured by an A-rated insurance company. This creates an ‘arms-length’ transaction. The insurance will be consistent for the duration of the term for every vehicle service contract. This insurance company is considered the fronting insurance company. If the claims exceed the reserves, the fronting insurance company is responsible for paying claims beyond the reserves. While an unlikely scenario, it is an important safety net for the dealer and the customer.

An “Administrator Obligor” dealer-owned reinsurance company is viewed as a small property and casualty company by the Internal Revenue Service. As long as annual premiums fall below $2,450,000 (for 2022 and adjusted annually for inflation) the corporation will only be taxed on investment income.

The company will utilize turnkey vehicle service contract transactions. An administrative fee is paid out as well as an insuring fee per policy to an experienced Administrator Obligor to administer all claims on a nationwide basis.

Retro Programs

Retro programs allow a dealer to participate in many of the underwriting profits and investment income without any risk. Participation in the profits are dictated by the volume of vehicle service contract sales and the underwriting profits produced by the dealer. The dealer typically receives a check for the profits at the end of the year.