Book Value
The estimated current-market sale price of an agent's book of business, commonly expressed as a multiple of annualized renewal commissions.
Full Definition
Book value is the market value of an agent or agency's book of business, typically calculated as a multiple of trailing-12-month renewal commissions. Multiples vary by line and quality of retention: Final Expense books 1.0–2.0× renewals; Medicare books 1.5–3.5× renewals (Medicare "books" are effectively streams of CMS-capped residuals tied to the agent-of-record relationship); ACA books 1.0–2.5× PMPM; mid-market life books 2.0–4.0× renewals; annuity books vary widely. Book value is the primary retirement asset for career insurance agents and determines the economics of FMO/agency exits and M&A. Persistency is the most important lever on book value: a book with 88% persistency is worth roughly 50% more than an otherwise identical book with 72% persistency.
Example
An agent retiring after 15 years has $145K in current Medicare renewals. At a 2.2× multiple the book sells to an FMO for $319K, typically structured as a 3-year earnout tied to continued persistency.
Related Terms
- Persistency — The percentage of policies that remain in force after a given period (commonly 13-month or 25-month), directly driving renewal income and book value.
- Renewal / Residual Commission — Commission paid in years 2+ of a policy's life — smaller per year than FYC but cumulatively the primary source of long-term agent income.
- LTV (Lifetime Value) — The total expected commission (FYC + renewals) from a policy or client over the full duration of the relationship.
- FYC (First Year Commission) — The commission an agent receives on a policy's first year of premium — the largest single income event per policy in most insurance lines.