2005 Best Practices Study

2005 BEST PRACTICES STUDY - APPENDIX

GLOSSARY

R EVENUES

1. Commercial P&C Commissions - Commission income from commercial property & casualty business, including surety and bonds, written on either an agency- or direct-billed basis. Includes fees received in lieu of commissions. 2. Personal P&C Commissions - Commission income from personal property & casualty business written on either an agency- or direct-billed basis. 3. P&C Service Fees - Total income generated from property & casualty loss control and engineering services, risk management services, claims services, self-insurance programs and other consulting services. Includes overrides for P&C underwriting and claims fees. Excludes fees received in lieu of commissions. 5. Group Life & Health - Total income from group accident and health insurance, life insurance and other group employee benefits. Includes commissions and fees for the sale of insurance products, pension/profit sharing/ 401(k)s, PEOs, and investment products (stock, securities); or for the provision of services including claims administration and adjusting, risk management consulting as well as cost containment and loss control services related to Group Life & Health coverage. 6. Individual Life & Health - Income from the sale of individual life, health and disability products and services. 7. Investment - All interest income, dividend income and any other investment income generated by the agency. Includes late charges and finance charges, gains and/or losses on sales of marketable securities. Excludes gains and/or losses on the sale of assets (fixed and/or intangible assets) and life insurance proceeds. 8. Miscellaneous - All other miscellaneous operating income received. Includes countersignature fees, gains or losses on the sale of assets, life insurance proceeds. Excludes bad debt recoveries and rental income. 4. Contingent/Bonus - Contingent, incentive and bonus income received by the agency from insurance carriers.

9. Total Revenues - The sum of items 1 through 8.

10. Brokerage Commission Expense - Commissions paid to other agencies or outside brokers. Excludes in-house producers compensated on a 1099.

11. Net Revenues - Total Revenues less Brokerage Commission Expense.

E XPENSES

12. Total Payroll - Includes all salaries, commissions, bonuses (including year-end bonuses), discretionary owner compensation, in-house contract producers compensated on a 1099. Excludes temporary help expense and deferred compensation. 13. Total Benefits - Includes expenses for health insurance, medical reimbursement, employee life insurance, retirement benefits, all expenses related to an Employee Stock Ownership Plan (ESOP/ESOT), payroll taxes, social security taxes and any other imposed employment taxes. 15. Travel and Entertainment - Includes airfare, meals, hotels, social & country club dues, and conventions. Excludes professional club dues such as the Rotary Club, etc. and automobile expenses. 16. Automobile - Includes lease, gas, maintenance/repair, employee parking, mileage allowances. Excludes depreciation and auto insurance. 17. Advertising & Promotions - Includes contest awards, gifts, customer relations functions, promotional materials, target marketing services, and fees paid to advertising or public relations agencies. 14. Total Compensation - The sum of Total Payroll and Benefits.

18. Total Selling - The sum of Travel & Entertainment, Automobile, and Advertising & Promotions expenses.

19. Occupancy - Includes total rent, utilities, building maintenance, property taxes, janitorial and other building related expenses. Any rental/sublet income is netted against this expense item. Excludes depreciation expenses.

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