Account ConcentrationCustomer Concentration
Account concentration measures the share of revenue tied to the agency's largest accounts — high concentration creates outsized risk if a single client churns post-close.
Read full definition →Glossary · 34 terms
Insurance Agency Valuation Glossary
Every term you'll see during a P&C agency valuation — plain-language definitions with worked examples, methodology context, and direct cross-links to the metrics and methods MyAgencyValue uses.
A
Add-BackEBITDA Adjustment · Owner Add-back
An add-back is an expense that is removed from reported earnings during normalization because it would not exist under a different owner — typically owner-specific perks, one-time legal fees, or excess T&E.
Read full definition →Agency Management SystemAMS
An agency management system (AMS) is the software platform an insurance agency uses to manage clients, policies, carrier downloads, accounting, and workflow — examples include Applied Epic, AMS360, HawkSoft, EZLynx, and QQCatalyst.
Read full definition →Asset Sale
An asset sale transfers specific assets of the agency (the book of business, contracts, equipment) to the buyer while leaving the legal entity behind with the seller — the most common structure in P&C agency transactions.
Read full definition →B
Book ArchetypeBook Type · Archetype Classification
Book archetype is a high-level classification of an agency's book — PL Commodity, Balanced, CL Specialty, or Premium Specialty — that determines the base multiple range before any quality adjustments.
Read full definition →Book RollBook Transfer · Book Roll-over
Book roll is the process by which an acquired book of business transfers from the seller's agency to the buyer's agency post-close, and book-roll probability estimates how much of the book actually retains through that transition.
Read full definition →C
Carrier AppointmentDirect Appointment · Carrier Contract
A carrier appointment is the formal contract that authorizes an agency to write business with a specific insurance carrier — direct appointments are agency-owned, while cluster or wholesale appointments are accessed through an intermediary.
Read full definition →Commercial LinesCL · Commercial P&C
Commercial lines (CL) refers to insurance products sold to businesses — property, general liability, business owner's policies (BOP), commercial auto, workers' compensation, and specialty coverages.
Read full definition →Contingency CommissionContingent Commission · Profit Sharing
Contingency commissions are bonus payments carriers pay agencies based on the profitability and growth of the business placed with them, typically 1–10% of premium volume.
Read full definition →D
Discretionary EarningsDE · Seller's Discretionary Earnings · SDE
Discretionary earnings (DE) are pro forma EBITDA plus the owner's reported compensation, used as a valuation base for very small agencies where one owner-operator is the entire agency.
Read full definition →E
EarnoutContingent Consideration · Performance Payment
An earnout is a portion of the purchase price paid to the seller after closing, contingent on the business hitting specified retention, revenue, or EBITDA targets — typically 10–30% of the total price across 1–3 years.
Read full definition →EBITDAEarnings Before Interest, Taxes, Depreciation, and Amortization
EBITDA is earnings before interest, taxes, depreciation, and amortization — the cash-flow proxy buyers use as the denominator in agency valuation multiples.
Read full definition →EBITDA Margin
EBITDA margin is normalized EBITDA divided by revenue, expressed as a percentage — industry-typical for a P&C agency is 20–25%.
Read full definition →EBITDA MultipleEarnings multiple
An EBITDA multiple values an insurance agency at a fixed multiple of its normalized EBITDA, typically 4.5x to 12x depending on agency size, growth, and book quality.
Read full definition →I
IRRInternal Rate of Return
Internal rate of return (IRR) is the annualized percentage return on an investment, computed as the discount rate that makes the net present value of all cash flows equal zero.
Read full definition →K
Key Person RiskKey Person Dependency · Owner Dependency
Key person risk is the degree to which an agency's revenue, retention, or carrier relationships depend on a single individual — typically the principal, top producer, or sole servicing AM.
Read full definition →L
Letter of IntentLOI · Term Sheet
A letter of intent (LOI) is a non-binding outline of the major economic and structural terms of a proposed acquisition, signed before formal due diligence begins.
Read full definition →Loss Ratio
Loss ratio is the percentage of premiums paid out as claims by a carrier — for an agency, the loss ratio of business placed with each carrier directly drives contingency commission income.
Read full definition →N
Normalized EBITDAPro Forma EBITDA · Adjusted EBITDA
Normalized EBITDA is reported EBITDA adjusted to reflect what the business would have earned at market-rate owner compensation and without one-time or owner-discretionary expenses.
Read full definition →O
Owner CompensationOwner Comp · Owner's Draw
Owner compensation is the total amount the agency principal pays themselves — base salary, bonus, benefits, and owner perks — used as a key normalization in EBITDA-based valuation.
Read full definition →P
Personal LinesPL · Personal P&C
Personal lines (PL) refers to insurance products sold to individuals and households — primarily auto, homeowners, dwelling fire, umbrella, and renters insurance.
Read full definition →Pro Forma
Pro forma means 'as if' — a restated income statement showing what the business would look like under a different set of assumptions, typically post-normalization.
Read full definition →Producer ConcentrationProducer Dependency
Producer concentration measures the share of an agency's new business or book responsibility tied to a single producer — high concentration is a meaningful headwind on valuation because it concentrates key-person risk.
Read full definition →Producer NPVProducer Net Present Value · Producer earnings overlay
Producer NPV calculates the net present value of an existing producer's future commission earnings, used to evaluate deals where the seller stays on as a producer post-close.
Read full definition →Property & CasualtyP&C · P/C
Property and casualty (P&C) insurance covers physical property and legal liability, distinct from life and health insurance — most independent insurance agencies focus exclusively on P&C.
Read full definition →Q
Quality BandQuality Adjustment · Multiple Adjustment
A quality band is the up-or-down adjustment applied to a base multiple based on book quality factors — typically capped at ±1.5x of EBITDA multiple, distributed across 7–8 individual factors.
Read full definition →R
Retention RateAccount Retention · Persistency
Retention rate is the percentage of accounts (or premium) that renew with the agency from one year to the next, with industry-typical retention for P&C agencies in the 85–90% range.
Read full definition →Revenue MultipleTop-line multiple
A revenue multiple values an insurance agency at a fixed multiple of its annual commission revenue, typically 1.5x to 3.5x depending on book composition and retention.
Read full definition →S
Seller NoteSeller Financing · Seller Carry
A seller note is a portion of the purchase price the buyer owes the seller as a loan rather than cash at close, typically structured at 4–7% interest over 3–7 years.
Read full definition →Size TierEBITDA Size Tier · Multiple Tier
A size tier is the EBITDA range that determines an agency's base EBITDA multiple — six tiers run from Micro (<$250K EBITDA) to Large Regional ($10M+ EBITDA).
Read full definition →Stock SaleEquity Sale
A stock sale transfers ownership of the agency's legal entity itself to the buyer, transferring all assets and liabilities together — generally seller-favorable from a tax perspective but rare in agency transactions.
Read full definition →T
Transition PlanIntegration Plan · Handoff Plan
A transition plan is the seller's documented strategy for transferring relationships, knowledge, and operational continuity to the buyer in the weeks and months following close.
Read full definition →Triangulation
Triangulation is the practice of running multiple valuation methods in parallel and reconciling their outputs into a single blended range, flagging when methods disagree by more than 20%.
Read full definition →W
Working Capital AdjustmentWCA · Net Working Capital Adjustment
A working capital adjustment trues up the purchase price at close based on whether the agency delivered the expected level of net working capital (current assets minus current liabilities) on the closing date.
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