Demand for risk insurance books is outstripping supply in Australia, with many buyers asking about risk insurance client registers and businesses, according to Radar Results, a buyer agent for financial services.
The firm’s CEO John Birt says buyers are also asking for books with much higher levels of annual fees.
He says the price multiple on risk insurance clients is traditionally 2.2 times annualised renewable commission, and as high as 2.7 times, depending on the average client age of each client.
Birt says the age range that is most favoured by buyers “…is between 35-55 years old, and the size of the business’s annual recurring revenue is AU$500K to $750K.”
“The younger the risk clients, the higher the multiple paid by our clients (the buyers).”
This, he notes, represents a purchase price “…between AU$1.35 million to $1.5 million based on the current price multiples of three times, and on the annual recurring revenue of $500,000.”
However, he adds that some of Radar Results’ buyers are asking for much higher levels of annual fees, “…as much as $3 million per year.”
“These risk books are harder to get but not impossible, as smaller companies are merging with larger ones,” he says.
Birt says price multiples on risk-insurance books in Australia “…are expected to increase from here, insulated from stock market falls.”