Retention (definition)
The share of clients or revenue that renews year over year; the single most-watched durability measure of a book.
Retention is the percentage of accounts, policies, or revenue that renews from one year to the next. It is the durability measure of a book of business: high retention means the revenue is an annuity, low retention means it is a sales treadmill.
Retention can be computed on policy count, account count, or revenue, and the three tell different stories. Revenue retention above 100 percent is possible when rate increases and account rounding outrun lost accounts.
In valuation diligence, buyers read retention by cohort and by producer. A book whose retention depends on one producer’s relationships is priced differently than one held by the agency’s service model.