2007 Best Practices Study

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2007 Best Practices Study
2007 Best Practices Study
So, for example, an agency that generates an EBITDA
margin (as a percent of revenue) of 20% and grows
organically by 10% achieves a “Rule of 20” score of
exactly 20%. (20% times 50% plus 10% = 20%.)
The higher the score, the better. The secret to the
Rule of 20 is the weighting of the relative importance
of organic growth versus EBITDA when it comes to
creating shareholder value (the weighting is 2 to 1).
Generally speaking, an outcome of 20 means an
agency is generating a shareholder return of
approximately 15%-16%, which is commonly viewed
as the “expected” rate of return for a well-run
insurance agency. A score of less than 20 indicates
room for improvement, while a score above 20 is
outstanding.
In 2006, only one public broker, Brown & Brown,
achieved a Rule of 20 outcome of 20 or more, as is
shown in the table below.
The comprehensive 2007 study can be purchased from
the Independent Insurance Agents & Brokers of
American (IIABA) Education Department. Order forms
can be downloaded at
or at For more
information please call 1-800-221-7917.
About the Study
The History
The annual Best Practices Studyoriginated in 1993 as
an initiative by the Independent Insurance Agents &
Brokers of America (IIABA) to help its members build
and maintain the value of their most important assets,
their agencies. By studying the leading agencies and
brokers in the country, the association hoped to
provide member agents with meaningful performance
benchmarks and business strategies that could be
adopted or adapted for use in improving agency
performance, thus enhancing agency value.
The IIABA retained the principals of Reagan Consulting
to create and perform the first Best Practices Study.
Annual updates conducted by Reagan Consulting
continue to provide important financial and
operational benchmarks, and the study is recognized
as one of the most thoughtful, effective and valuable
resources ever made available to the industry.
The Process
Once every three years, the IIABA asks insurance
companies, state association affiliates, and other
industry organizations to nominate for each of the
studies’ revenue categories those agencies they believe
to be among the better, more professional agencies in
the industry.
The nominated agencies are then invited to
participate. They must be willing to share key
business practices/philosophies and to complete an in-
depth survey detailing their financial and operational
year-end results. Those results are then scored and
ranked objectively for inclusion on the basis of
operational excellence.
This year, the beginning of a new three-year study
cycle, more than 800 independent agencies
throughout the U.S. were nominated to take part in
the annual study, but only 195 agencies qualified for
the honor. To be chosen, the agency had to be
Rank Public Brokers
Organic
Growth
EBITDA
Margin
Rule of 20
Outcome
1 Brown & Brown 4.5% 38.8% 23.9%
2 Willis Group 8.0% 21.3% 18.7%
3 Hub Group 5.0% 26.7% 18.4%
4 Hilb, Rogal & Hobbs 4.4% 27.0% 17.9%
5 Arthur J. Gallagher 6.0% 21.2% 16.6%
6 USI 1.8% 20.7% 12.2%
7 Marsh & McLennan 2.0% 14.2% 9.1%
8 Aon 2.0% 13.9% 9.0%
Rule of 20 Outcome