How Insurance Agencies Are Valued
Insurance agencies are one of the most actively traded business types in the M&A market. In 2024, over 600 insurance agency transactions were announced in the US alone, with PE-backed buyers accounting for 73.5% of deal volume. The combination of recurring revenue, high margins, and a fragmented market makes insurance agencies highly attractive to acquirers.
Book of Business Valuation (Revenue Multiple)
The primary valuation method for insurance agencies is 1.5-3.0x annual revenue(also called "book of business" or "commission revenue"). A $2M revenue agency would sell for $3M to $6M. The multiple depends on retention rates, lines of business, and carrier relationships.
Commercial lines typically command higher multiples (2.0-3.0x) than personal lines (1.5-2.0x) because commercial accounts are stickier, have higher premiums, and generate more cross-sell opportunities. Agencies with a strong commercial book are the most sought-after.
EBITDA-Based Valuation (Larger Agencies)
Agencies with $2M+ EBITDA attract PE platform and add-on interest at platform-tier earnings multiples. The largest platform deals have traded at 12-14x in recent years. PE firms like Acrisure, Hub International, and Gallagher have built massive insurance brokerage platforms through hundreds of acquisitions.
What Drives Insurance Agency Value
Retention rate is king. Agencies with 90%+ client retention rates command premium multiples because the revenue is nearly guaranteed to persist post-sale. Below 85% retention, buyers discount heavily.
Carrier relationships and contingent commissions add significant value. Volume-based bonuses from carriers can represent 5-15% of agency revenue and are highly profitable.
Producer dependency, if one producer controls 30%+ of the book, buyers worry about that revenue walking out the door. Diversified books across multiple producers are worth more.