2006 Best Practices Study

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AGENCIES WITH REVENUES UNDER $500,000
2006
PROFILE
REVENUES/
EXPENSES
FINANCIAL
STABILITY
EMPLOYEE
OVERVIEW
PRODUCER
INFO
SERVICE
STAFF
INFO
TECHNOLOGY
INSURANCE
CARRIERS
7 2006 Best Practices Study
Revenue/Expense/Profit Summary
Average
+25%
Profit
+25%
Growth
Revenues (% by Source)
Commercial Lines 34.7% 28.2% 42.6%
Personal Line 53.3% 58.0% 43.3%
P&C Service Fees 0.4% 0.0% 1.5%
Contingent/Bonus 7.2% 4.9% 7.6%
Group Life & Health 2.1% 4.9% 2.4%
Individual Life & Health 1.5% 3.0% 1.7%
Investments 0.5% 1.0% 0.8%
Miscellaneous 0.2% 0.0% 0.2%
Total Revenues 100.0% 100.0% 100.0%
Brokerage Commission Expense 1.4% 0.0% 0.0%
Net Revenues 98.6% 100.0% 100.0%
Expenses (as % of Net Revenues)
Compensation 46.6% 34.5% 47.9%
Selling 7.5% 6.1% 6.4%
Operating 20.8% 15.7% 16.5%
Administrative 3.4% 4.0% 2.8%
Total Expenses 78.2% 60.4% 73.6%
Pre-Tax Profit 21.8% 39.6% 26.4%
Pro Forma Profit1 30.9% 56.6% 38.8%
Operating Pre-Tax Profit2 13.9% 33.7% 18.1%
Pro Forma EBITDA3 34.3% 60.6% 41.6%
% Net Revenue
Average
+25% Profit
+25% Growth
60%
30%
20%
10%
Pre-Tax
Profit
Pro Forma
Pre-Tax Profit
Operating
Pre-Tax Profit
1Pre-tax profit when discretionary expenses (bonuses, compensation, and perks) made for the benefit of
the owners, based solely on ownership, are removed (i.e., removing expenses that would not be
incurred if a third party owned the agency).
2Pre-tax profit minus contingents, bonus and investment income.
3EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization
40%
50%