Insurance Agency Valuations Continue to Rise

By Team INEX |

Insurance agency valuations have experienced a significant rise over recent years, and they continue to garner attractive purchase prices despite the status of the broader market. Understanding your agency’s valuation gives you an idea of what your company is worth. A lack of knowledge in this area could lead to poor wealth planning or missed opportunities, while a clear understanding can help you increase your company’s value and improve long-term returns. While recent reports show an increase in insurance agency valuations, rising prices for insurance businesses is a macro trend experienced over the past decade.

The Importance of Insurance Agency Valuations

The insurance industry often endures cyclical pricing, with gains and losses heavily dependent on local economic conditions. Knowing what your business is worth is necessary for several reasons, whether the market is hard or soft.

You may want to sell your agency or transfer ownership or interest to team members or partners. Likewise, you might want to buy and sell agreements with shareholders or deliver financial reporting. You also might want to evaluate management performance or company stability.

Insurance agency valuations are a driving force behind mergers and acquisitions in the market, with the current market maintaining historically high valuations. Despite the rising costs, transactions continue based on the low risk profile of the insurance industry. Investment decisions consider the return on investment, and the insurance market continually provides exceptional returns.

The Expectations

If you are looking for a quick assessment of your agency’s valuation based on income, you can use EBITDA (earnings before interest, taxes, depreciation, and amortization). Although it leaves out capital costs, this is a simple formula to assess profitability by measuring cash profit. Another option for a ballpark figure is to take your earned commission and multiply it by one and a half. It is not wholly accurate, but it does give you a sense of direction. Market-based valuations look outward at the value of similar agencies to get an idea of what your agency may be worth.

The Reason for the Rise in Value

Recent years have seen valuations for a well-run brokerage with between $3 million-5 million in revenue garner a 12.5 times earnings before amortization, depreciation, and interest taxes. When factoring in future performance, these same brokerages could expect three times EBITDA available through an earn-out. Just 10 years ago, these numbers would show six times EBITDA on a guaranteed price or two-and-half times available for an earn-out.

Since that peak, the rising cost of capital and a slowdown in M&A activity in the insurance market in late 2022 and thus far in 2023 have served to reduce average EBITDA valuation to the mid-high single digits. Despite this relative decrease, agency valuations remain robust from a historical perspective, and expectations are that M&A activity should continue steadily over the coming years.

Ultimately, demand remains robust, with private equity buyers leading the way as these investors are looking at more than just the EBITDA of any one business. Their valuations consider factors like projected economic growth and cost of capital. Furthermore, factors like interest rate trends and the geopolitical environment consistently come into play during negotiations. There is also the availability of high-yield debt and projected exit valuation, and exit timing which inform specific deal terms.

Often these buyers plan to hold onto their investments for a while. They calculate a value based on the assumption they will achieve three turns multiple on invested capital in five years or less.

The Projections for Insurance Broker Valuations

Even with looming concerns about the nation’s economic stability, the rate of return for investments in the brokerage market continues to attract buyers. It would not be surprising to see insurance broker valuations remain high for the near future.


INEX is a multi-disciplinary firm providing management consulting and advisory services to the owners of insurance agencies throughout the United States, and real estate investment services. Our senior principals have participated in over 300 perpetuation, merger and acquisition (M&A) transactions over the past three decades. Staff professional designations include Chartered Property & Casualty Underwriter (CPCU), Certified Insurance Counselor (CIC) and Certified Commercial Investment Member (CCIM), as well as a variety of insurance and advisory licenses throughout the United States. To learn more, call us at 603-665-6000 or visit our website.