Broking book valuations built on retention evidence and what actually transfers, not hearsay multiples.

An insurance brokerage valuation is an independent assessment of the market value of a broking business or client book, based on recurring commission and fee income, the AFSL or authorised representative structure it sits inside, and what actually transfers to a buyer. Prismi prepares evidence-led insurance brokerage valuations across Australia for book sales, principal exits, related-party transfers and CGT matters, concluding at the most supportable position within a defensible range.

When an insurance broking business needs a defensible value

An insurance brokerage valuation is almost always commissioned around a specific ownership event: sale of a book or the whole brokerage, an authorised representative buying out or selling their client base, admission or exit of a principal, or a related-party transfer into a family trust or company. A related-party transfer engages the market value substitution rule in s 116-30 ITAA 1997; exits raise the Division 152 small business CGT concessions; restructures may rely on the Subdivision 328-G rollover; and family law settlements, deceased estates, shareholder disputes and lending against the book all need a number that will survive scrutiny. In each case the standard is the willing-but-not-anxious test from Spencer v Commonwealth (1907), applied on the market value basis in IVS 104 and, for tax matters, prepared consistently with the ATO's Market valuation for tax purposes guidance. An insurance brokerage valuation that starts from a multiple someone quoted at a cluster group meeting, with no evidence behind it, answers none of those questions. Prismi pins down the valuation date, purpose and standard of value first, then selects methodology — and if a target value is demanded, we will say so and decline the engagement on those terms.

Per-dollar-of-income conventions and the EBITDA cross-check

Insurance broking is one of the few Australian sectors with a genuine per-dollar-of-revenue pricing convention: books and brokerages are habitually quoted as a multiple of recurring commission and fee income. The convention exists because the income is unusually durable — general insurance renews annually, clients move reluctantly, and the servicing cost of a settled book is modest — but it is shorthand, not a method. Two books producing identical recurring income can be worth materially different amounts once fee-for-service versus commission mix, retention history, client and insurer concentration, average account size and the cost to service the book are priced. Prismi values going-concern brokerages on capitalised maintainable earnings with principal remuneration normalised to market, cross-checked against the revenue-multiple convention; for pure book transfers the revenue convention leads, tested against the earnings a buyer can actually extract after servicing costs. Consolidator appetite complicates the shorthand further. Listed broker networks and private-capital-backed consolidators have been persistent acquirers, and the headline multiples their deals imply embed synergies — the book drops into an existing licence, back office and insurer arrangements — plus earn-outs and retention conditions. A standalone buyer cannot pay a synergy price, and a supportable valuation states which buyer pool the concluded position assumes.

AFSL holder or authorised representative: what a buyer actually acquires

The licensing structure determines what is being sold. Where the brokerage holds its own Australian financial services licence, the seller can offer shares in the licensee entity or the business assets out of it. A share sale carries the licence with the entity — with ASIC notified of the change of control — but it also carries the entity's conduct history: complaints, breach reports, remediation exposure and professional indemnity run-off travel with the company, and buyer due diligence prices them. An asset sale is cleaner, but the licence does not transfer, so the buyer needs its own authorisations before it can service the book. Where the principal is an authorised representative under someone else's licence, the book is a bundle of client relationships and renewal rights that sits legally inside the licensee's arrangements, and the AR agreement decides everything: who owns the client relationships, whether transfer requires licensee consent, what restraints bind the seller, and whether the network holds a first right of refusal or a formulaic buy-back price. A buy-back formula in an AR agreement is a term of sale, not a market valuation — for a related-party transfer or a tax matter, market value can sit above or below it, and the report explains the difference rather than adopting the formula.

Insurer agency agreements, binder authorities and concentration

Commission flows under agency and distribution agreements with each insurer, and those agreements set the rates, payment terms and termination rights that determine the quality of the income stream. Binder authorities — delegated authority to quote and bind cover within an insurer's underwriting parameters — add a second layer: binder income is typically richer and sometimes carries profit-share, but the authority is a contract the insurer can decline to novate, re-price at renewal or withdraw for performance. None of these arrangements transfers automatically. The working file records which agreements require consent, which are personal to the licensee or the principal, and what the income looks like if a binder is lost — because a buyer will run exactly that scenario. Concentration is then assessed on three axes: income by insurer, income by product class, and income by client. A book earning a large share of its income through one binder, one strategic insurer relationship or a handful of large commercial clients is a different asset from a granular SME book of the same size, and the methodology reflects that through the multiple, the discount rate or explicit scenario adjustments to the supportable range.

Retention evidence and clawback: how the price actually holds

Retention is the assumption a broking book valuation lives or dies on, and it must be evidenced, not asserted. Prismi derives retention from the broking system's renewal register over two to three years, measured by client count and by income — a book can hold client numbers while bleeding premium — and separates renewal income from new business, because a buyer pays for the renewal stream and treats new business capacity as upside. Mid-term cancellations create unearned commission refunds; life risk commissions written within the last two years carry legislated clawback if the policy lapses; and sale deeds routinely defer part of the consideration against retention through the first one or two renewal cycles. Those mechanics interact with value: a headline multiple with a heavy retention-based earn-out is not the same price as cash at completion, and where the valuation supports a transaction the report is explicit about what the concluded value assumes about deal structure. Pricing expected attrition into the valuation — rather than leaving it to the warranties and the earn-out — is precisely the adjustment a sceptical buyer's accountant will make, so the valuation makes it first.

What the valuation file needs from you

• ·24–36 months of commission and fee statements, reconciled to the broking system
• ·A client-level renewal register: product classes, inception and renewal dates, commission and fee income, insurer
• ·AFSL details, or the authorised representative agreement including client-ownership, consent, restraint and buy-back clauses
• ·Insurer agency and distribution agreements, and any binder authorities or underwriting agency arrangements
• ·Retention and lapse history by client count and by income, with new business separately identified
• ·Fee-for-service versus commission breakdown, and any premium-funding commission income
• ·Concentration schedules: top clients by income, and income by insurer and product class
• ·Any prior appraisals, sale offers or approaches from consolidators or network buyers
• ·Complaints, breach and professional indemnity claims history where a share sale is contemplated

Which engagement tier fits a broking valuation

A straightforward benchmark for an authorised representative's book — planning an exit, testing a network buy-back formula — is typically served by the Essential tier from $1,495 + GST (10–14 business days). Most broking work sits in the Comprehensive tier from $3,995 + GST (15–25 business days): book sales and purchases, principal admissions and exits, and related-party transfers where the position may later be reviewed, with the retention derivation, concentration analysis and transfer-consent review documented in full. Where the valuation must withstand challenge — family law, disputes between principals, a Division 152 claim with review exposure, or a licensee share sale with conduct-history diligence — the Defensible Valuation File from $8,995 + GST (25–35 business days) is the appropriate scope. The Valuation Range & Scenario Review from $12,995 + GST (30–45 business days) suits principals weighing a consolidator offer against holding the book, with scenarios modelled across retention and deal-structure assumptions. Retrospective valuations attract a $495 surcharge per historical date, additional entities are $750 each, and urgent engagements carry a 30% rush loading. Every report is prepared under APES 225, senior-reviewer signed with a formal independence statement, and the working file is retained for 10 years. Fees are fixed at engagement and never contingent on the concluded value.