2007 Best Practices Study

Agencies with Revenues Between $5,000,000 and $10,000,000

Executive Perspectives

Profile

Revenues/ Expenses

Financial Stability

Employee Overview

Producer Info

Service Staff Info

Technology

Insurance Carriers

Appendix

Expenses (as % of Net Revenue)

70%

60%

50%

40%

30%

20%

10%

0%

Selling

Operating

Administrative

Compensation

Average

+25% Profit 5 Profit

+25% Growth rowth

Revenue/Expense/Profit Summary

Average

+25% Profit

+25% Growth

Revenues (% by Source) Commercial Lines

50.5%

39.8%

51.4%

1 Pre-tax Profits if discretionary expenses are eliminated and all owners compensated as employees 2 Pre-tax Profits excluding income from contingents, bonus and investment income 3 EBITDA—Earnings Before Interest Taxes Depreciation and Amortization

Bonds

0.9%

0.2%

0.5%

Personal Lines

19.8%

31.9%

15.1%

VAS - P&C

1.5% 9.4%

0.3%

0.2% 8.4%

Contingent/Bonus Group Life & Health Individual Life & Health

11.9%

11.6%

8.5% 2.8% 0.0% 0.7% 1.9% 2.0%

14.0%

3.3% 0.1% 0.4% 1.7% 0.8%

5.1% 0.2% 0.9% 2.0% 2.2%

VAS - L&H

Bonus/Overrides Investments Miscellaneous

Total Revenues

100.0%

100.0%

100.0%

Brokerage Commission Expense

1.2%

0.2%

0.3%

Net Revenues

98.8%

99.8%

99.7%

Expenses (as % of Net Revenues) Compensation

65.5%

57.4%

66.3%

Selling

3.1%

3.5%

2.9%

Operating

12.5%

13.3%

11.8%

Administrative

2.8%

3.6%

2.1%

Total Expenses

83.9%

77.7%

83.2%

Pre-Tax Profit

16.1% 27.2%

22.3% 41.9%

16.8% 29.9%

Pro Forma Pre-Tax Profit 1 Operating Pre-Tax Profit 2

4.5%

7.8%

5.6%

EBITDA 3

18.4% 29.5%

24,2% 43.8%

18.7% 31.7%

Pro Forma EBITDA

101 2007 Best Practices Study | Agencies with Revenues Between $5,000,000 and $10,000,000 | Revenues/Expenses