2010 Best Practices Study

Analysis of Agencies with Revenues Under $1,250,000

Profit/Loss Summary

Mgmt. Perspectives

Average

+25% Profit

+25% Growth

Profile

Revenues (as % of Gross Revenue) Commercial Lines

43.3%

44.1%

46.8%

Revenues

Bonds

0.7%

0.4%

1.4%

Expenses

Personal Lines

40.0%

40.7%

35.1%

Value Added Services Contingent/Bonus

0.8% 7.5% 5.7% 0.1% 1.6% 0.1% 0.1% 0.1%

0.0% 6.1% 7.0% 0.0% 1.8% 0.0% 0.0% 0.0%

2.2% 9.6% 3.3% 0.0% 1.3% 0.1% 0.1% 0.1%

Profitability

Employee Overview

Group Medical All Other Group

Producer Info

Individual

Bonus/Overrides Investments Miscellaneous

Staff Service Info

Technology

Total Revenues

100.0%

100.0%

100.0%

Insurance Carriers

Brokerage Commission Expense

0.0%

0.2%

0.0%

Net Revenues

100.0%

99.8%

100.0%

Appendix

Expenses (as % of Net Revenues) Compensation

55.0%

45.7%

51.9%

Selling

4.6%

4.1%

5.3%

Operating

17.2%

12.9%

18.0%

Administrative

1.7%

0.9%

1.2%

Total Expenses

78.5%

63.5%

76.5%

Profit/Loss (as % of Net Revenues)

Pre-Tax Profit

21.5% 25.1%

36.5% 43.2% 18.7% 36.9% 43.8%

23.6% 25.8% 13.7% 25.3% 27.6%

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

9.9%

EBITDA 3

23.9% 27.5%

Pro Forma EBITDA

1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees

2 Pre-tax Profits excluding contingents, bonus and investment income

3 EBITDA—Earnings Before Interest Taxes Depreciation and Amortization

Profitability

2010 Best Practices Study

Agencies with Revenues Under $1,250,000

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