The demand for adviser life insurance businesses remains strong due to the lack of opportunities in the open market, according to a company specialising in buying and selling adviser businesses.

“Few businesses come to market as most of the underwriters arrange any sale to somebody in their aligned network,” Kenyon Prendeville Director Stephen Prendeville told insuranceNEWS.com.au.

“With such a limited market, the prices are very hard.”

Valuations of life insurance businesses are currently running at 3.5 times renewal income, but Mr Prendeville says his company recently sold a Victorian business for 3.75 times income.

“Buyers of these businesses are looking for robust revenue structures with retention rates of about 3%,” he said.

“The average age of the client base is also looked at and the opportunity to cross-sell to a financial planning practice.”

Advisers thinking of selling their businesses should look at undertaking profit segmentation by sector before they put it up for sale, Mr Prendeville says.

“The ability to show clearly what is behind the revenues will help a seller achieve a good price for their business,” he said.

Advisers should also accept they will have to remain with the business after it has been sold for much longer than in the past.

“Previously a principal would leave the business shortly after it was sold, but buyers are now looking at retentions of up to three years,” Mr Prendeville said.

General insurance businesses for sale are achieving valuations of between 1.25 to 1.65 times income.

The company recently sold a general insurance business with a large book for 1.9 times income indicating there is a strong demand for these types of business when they come up.

The demand for financial services businesses remains very strong, with Kenyon Prendeville having 100 registered buyers on its books late last year.