2010 Best Practices Study

Analysis of Agencies with Revenues Between $1,250,000 and $2,500,000

Profit/Loss Summary

Mgmt. Perspectives

Average

+25% Profit

+25% Growth

Profile

Revenues (as % of Gross Revenue) Commercial Lines

50.4%

53.4%

51.7%

Revenues

Bonds

2.0%

3.7%

1.6%

Expenses

Personal Lines

28.5%

23.6%

32.9%

Value Added Services Contingent/Bonus

0.1% 9.1% 4.9% 0.8% 2.4% 0.4% 0.6% 0.6%

0.0%

0.1% 6.9% 3.4% 0.9% 1.9% 0.1% 0.3% 0.1%

Profitability

10.3%

Employee Overview

Group Medical All Other Group Individual L&H Bonus/Overrides Investments Miscellaneous

3.4% 0.0% 4.3% 0.2% 0.6% 0.5%

Producer Info

Staff Service Info

Technology

Total Revenues

100.0%

100.0%

100.0%

Insurance Carriers

Brokerage Commission Expense

1.1%

0.0%

2.6%

Net Revenues

98.9%

100.0%

97.4%

Appendix

Expenses (as % of Net Revenues) Compensation

58.1%

43.8%

58.1%

Selling

3.2%

3.2%

2.7%

Operating

15.7%

13.7%

14.3%

Administrative

2.8%

2.1%

4.4%

Total Expenses

79.8%

62.9%

79.4%

Profit/Loss (as % of Net Revenues)

Pre-Tax Profit

20.2% 26.1%

37.1% 44.0% 21.8% 38.4% 45.3%

20.6% 24.9%

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

8.0%

8.5%

EBITDA 3

23.4% 29.3%

24.7% 29.0%

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 Between $1,250,000 and $2,500,000

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