2007 Best Practices Study

Agencies with Revenues Between $1,250,000 and $2,500,000

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

49.4%

42.1%

55.4%

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

1.8%

3.9%

2.0%

Personal Lines

25.6%

29.6%

21.0%

VAS - P&C

0.2%

0.0%

0.0%

Contingent/Bonus Group Life & Health Individual Life & Health

11.2%

12.5%

11.7%

6.5% 2.9% 0.3% 0.9% 1.0% 0.3%

5.0% 4.2% 0.0% 1.5% 1.3% 0.0%

6.3% 1.3% 0.0% 0.0% 1.6% 0.7%

VAS - L&H

Bonus/Overrides Investments Miscellaneous

100.0%

100.0%

100.0%

Total Revenues

Brokerage Commission Expense

1.3%

1.6%

0.0%

98.7%

98.4%

100.0%

Net Revenues

Expenses (as % of Net Revenues) Compensation

57.9%

49.0%

56.7%

Selling

4.5%

3.5%

5.8%

Operating

15.3%

14.6%

18.7%

Administrative

1.2%

0.7%

1.0%

Total Expenses

78.9%

67.9%

82.1%

Pre-Tax Profit

21.1% 28.0%

32.1% 45.0% 16.5% 33.4% 46.2%

17.9% 27.0%

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

7.8%

4.6%

EBITDA

23.2% 30.1%

19.9% 29.0%

Pro Forma EBITDA 3

43 2007 Best Practices Study | Agencies with Revenues Between $1,250,000 and $2,500,000 | Revenues/Expenses