Insurance broking valuations for Melbourne brokers selling, buying or planning succession.

A Melbourne insurance broking business is valued on the brokerage and fee income its clients bring each year at renewal, how reliably those clients renew, and what it costs to service them. Our valuers test renewal retention by client and by class of cover, how concentrated the book is, how much income depends on the principal's relationships, and whether the licensing arrangements let the book move to a buyer, then capitalise the earnings a buyer can expect to keep.

Renewal income is what a buyer pays for

A broking business earns most of its income when policies renew, through brokerage and broker fees. A buyer is paying for clients who keep renewing through the business year after year. So the valuation starts with the renewal register, not just the accounts: how many clients renew each year, how much of last year's income came back, and why clients left. It splits income by class of cover, such as business packages, trade liability, commercial property, strata, motor fleet and transport, because some classes renew more reliably than others. It also checks how much income comes from new clients each year compared with renewals, so the buyer can see what is recurring and what had to be won again.

Premium movements and client concentration

Brokerage generally moves with premiums. In a year when insurers lift premiums sharply, a broker's income can rise without a single new client, and in a softer market it can fall the same way. The valuer looks at income over several years and separates growth from new clients from growth that came from price, so the earnings used in the valuation are maintainable rather than the peak of a cycle. Concentration is the other test. A broker in Dandenong South, Campbellfield or Laverton North whose largest manufacturing or transport client pays a big share of brokerage carries more risk than one with hundreds of smaller trade and small business clients across Melbourne's suburbs. Losing one large account after a sale can take a noticeable slice of value with it.

Licensing, claims handling and representatives

ASIC says you generally need to be authorised under an Australian financial services licence to run a financial services business, either as the licensee or as an authorised representative of one, and it lists general insurance among financial products and claims handling and settling among financial services. Since 1 January 2022, ASIC says people providing claims handling and settling services need an AFS licence, and licensed insurers and brokers had to extend their licences to cover it. Licensees must provide financial services efficiently, honestly and fairly, manage conflicts of interest and supervise their representatives. For a valuation, licensing goes to transferability: a broker that holds its own licence sells a different asset from one that operates as an authorised representative under another firm's licence, where the network agreement may control what can be sold and to whom. The valuer reads those agreements. Licensing questions are for the parties' lawyers and ASIC.

People, service and the cost base

Clients often deal with one account manager for years, and in a small brokerage that person is often the principal. The valuation looks at who manages the largest accounts, whether a successor already knows those clients, and how long the selling principal will stay for handover. On costs, the valuer sets a market salary for the principal and each account manager and claims officer, and keeps in licence and compliance costs, professional indemnity insurance, software and rent at their real level. Premium funding income, network rebates and other income are each looked at separately, because a buyer may not keep them on the same terms.

When Melbourne broking businesses are valued

• ·Sale of a broking business or a client book to another broker or group
• ·A principal retiring and staff buying the business over time
• ·A shareholder or director leaving
• ·Moving from an authorised representative network to an own licence, or the reverse
• ·Moving the business between family entities
• ·Market value evidence for small business CGT concessions on exit (your accountant applies them)

• ·Check if you need an AFS licence, ASIC
• ·When the rubber hits the road: making insurance claims under the new reforms, ASIC
• ·AFS licensee obligations, ASIC