2007 Best Practices Study

Agencies with Revenues Over $25,000,000

Executive Perspectives

Profile

Revenues/ Expenses

Financial Stability

Employee Overview

Producer Info

Service Staff Info

Technology

Insurance Carriers

Appendix

Expenses (as % of Net Revenue)

70%

60%

50%

40%

30%

20%

10%

0%

Selling

Operating

Administrative

Compensation

Average

+25% Profit 5 Profit

+25% Growth rowth

Revenue/Expense/Profit Summary

Average

+25% Profit

+25% Growth

Revenues (% by Source) Commercial Lines

55.7%

47.2%

60.8% 5.3% 3.9% 1.9% 6.3% 0.8% 1.3% 0.3% 2.5% 2.3% 14.6%

1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding income from contingents, bonus and investment income 3 EBITDA—Earnings Before Interest Taxes Depreciation and Amortization

Bonds

3.4%

2.9%

Personal Lines

10.9%

21.1%

VAS - P&C

2.2% 7.1%

2.7% 7.9%

Contingent/Bonus Group Life & Health Individual Life & Health

15.1%

13.6%

0.7% 0.6% 0.4% 2.5% 1.3%

1.0% 0.0% 0.3% 2.1% 1.1%

VAS - L&H

Bonus/Overrides Investments Miscellaneous

Total Revenues

100.0%

100.0%

100.0%

Brokerage Commission Expense

3.5%

2.0%

3.4%

Net Revenues

96.5%

98.0%

96.6%

Expenses (as % of Net Revenues) Compensation

63.6%

58.0%

64.9%

Selling

4.3%

3.6%

5.2%

Operating

14.7%

13.0%

15.4%

Administrative

2.6%

1.7%

2.0%

Total Expenses

85.2%

76.3%

87.6%

Pre-Tax Profit

14.8% 18.2%

23.7% 27.2% 13.1% 26.4% 29.4%

12.4% 16.9%

Pro Forma Pre-Tax Profit 1 Operating Pre-Tax Profit 2

4.5%

3.0%

EBITDA 3

18.6% 22.0%

16.1% 20.6%

Pro Forma EBITDA

159 2007 Best Practices Study | Agencies with Revenues Over $25,000,000 | Revenues/Expenses