2004 Best Practices Study

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

Revenue/Expense/Profit Summary

EXECUTIVE PERSPECTIVES

+25% Profit

+25% Growth

Average

Revenues (% by Source) Commercial Lines

50.9% 23.9% 2.2% 8.2% 10.7% 2.3% 0.5% 1.3% 4.0% 96.0% 58.6% 3.2% 14.3% 3.3% 79.4% 20.6% 26.2% 10.4%

58.1% 22.6% 6.1% 6.8% 4.4% 0.8% 0.3% 0.9% 0.9% 99.1% 47.8% 3.1% 12.7% 2.6% 66.2% 33.8% 41.3% 23.2%

48.8% 28.0% 5.6% 9.9% 4.2% 0.9% 0.2% 2.4% 4.6% 95.4% 59.6% 3.5% 14.4% 3.2% 80.6% 19.4% 22.6% 8.9%

Personal Line

P&C Service Fees Contingent/Bonus Group Life & Health Individual Life & Health

PROFILE

Investments Miscellaneous

REVENUES/ EXPENSES

Total Revenues

100.0% 100.0% 100.0%

Brokerage Commission Expense

Net Revenues

Expenses (as % of Net Revenues) Compensation

FINANCIAL STABILITY

Selling

Operating

Administrative

Total Expenses

EMPLOYEE OVERVIEW

Pre-Tax Profit Pro Forma Profit 1

Operating Pre-Tax Profit 2

Pro Forma EBITDA 3

29.5%

43.9%

25.8%

PRODUCER INFO

1 Pre-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). 2 Pre-tax profit minus contingents, bonus and investment income. 3 EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization

SERVICE STAFF INFO

Profitability

50%

Average

40%

+25% Profit

TECHNOLOGY

+25% Growth

30%

20%

INSURANCE CARRIERS

% Total Net Revenue

10%

Pre-Tax Profit

Operating Pre-Tax Profit

Pro Forma Pre-Tax Profit

APPENDIX

89