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AGENCIES WITH REVENUES BETWEEN $2,500,000 AND $5,000,000

90

EXECUTIVE

PERSPECTIVES

PROFILE

REVENUES/

EXPENSES

FINANCIAL

STABILITY

EMPLOYEE

OVERVIEW

PRODUCER

INFO

SERVICE

STAFF

INFO

TECHNOLOGY

INSURANCE

CARRIERS

APPENDIX

FINANCIAL STABILITY

A.

Current Ratio

A current ratio greater than 1:1 indicates that cash and assets with short-term

maturities are sufficient to meet a firm’s short-term obligations.

B.

Tangible Net Worth

The tangible net worth is an important measure as it represents the net value of the

corporation if it were liquidated. A low or negative tangible net worth impacts a firm’s

ability to invest in new opportunities, develop new products, hire new employees, make

other capital expenditures and handle stockholder redemption obligations

.

C1.

Receivables

The following ratio measures the collection practices of an agency, with a lower ratio

representing more timely collections.

C2.

Aged Receivables

D.

Receivables Management Practices

Participants were asked to indicate which practices they utilized and to score the

practices’ effectiveness where

1 = NOT EFFECTIVE

and

5 = EXTREMELY EFFECTIVE

.

Average

Top 25%

Liquidity/Current Ratio

1.48:1

2.04:1

Average

Top 25%

Tangible Net Worth (as % of Net Rev)

6.1% 23.1%

Average

Top 25%

Receivables/Payables Ratio

51.2%

5.5%

Average

Top 25%

Over 60

15.5%

8.0%

Over 90

9.3%

3.3%

% Utilizing

Score

Management reviews receivables regularly

Have strict collection policy

Hold producers responsible for bad debts

Encourage/require use of direct bill

Encourage/require use of premium finance

Use pre-billing and binder billing

Do not allow agency financing

Centralize collections & remove producer involvement

Provide clients with written copy of collection policies

Other

"The key for us is having the payment of producer commission tied to the collection of

the premium."

0%

100%

0.0

4.0

3.0

2.0

1.0

5.0