2008 Best Practices Study

Agencies with Revenues Between $2,500,000 and $5,000,000

Profile

Revenues/ Expenses

Financial Stability

Employee Overview

Producer Info

Service Staff Info

Technology

Insurance Carriers

Appendix

Expenses (as % of Net Revenue)

Revenue/Expense/Profit Summary

Average

+25% Profit

+25% Growth

Revenues (% by Source) Commercial Lines

51.8%

46.7%

51.2%

1 Pre-tax Profits if discretionary expenses are eliminated (e.g. certain owner’s perks/benefits), and one- time or extraordinary revenues are excluded 2 Pre-tax Profits excluding income from contingents, bonus and investment income 3 EBITDA—Earnings Before Interest Taxes Depreciation and Amortization 4 EBITDA if discretionary expenses are eliminated (e.g. certain owner’s perks/benefits), and one- time or extraordinary revenues are excluded

Bonds

2.1%

2.2%

0.2%

Personal Lines

23.0%

30.0%

27.8%

VAS - P&C

0.2%

0.2%

0.2%

Contingent/Bonus Group Life & Health Individual Life & Health

10.4%

15.8%

12.9%

9.1% 1.7% 0.0% 0.4% 1.2% 0.2%

3.0% 1.0% 0.0% 0.0% 0.7% 0.3%

4.5% 2.0% 0.0% 0.0% 0.9% 0.2%

VAS - L&H

Bonus/Overrides Investments Miscellaneous

100.0%

100.0%

100.0%

Total Revenues

Less Brokerage Commission Expense

0.8%

0.0%

0.5%

99.2%

100.0%

99.5%

Net Revenues

Expenses (as % of Net Revenues) Compensation

60.0%

50.3%

54.0%

Selling

4.4%

4.9%

4.8%

Operating

14.6%

15.5%

15.2%

Administrative

2.3%

1.7%

2.4%

Total Expenses

81.3%

72.4%

76.3%

Pre-Tax Profit

18.7% 26.6%

27.6% 41.1%

23.7% 32.1%

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

5.8%

8.1%

9.8%

EBITDA 3

21.1% 28.4%

29.8% 42.2%

26.7% 33.0%

Pro Forma EBITDA 4

49 2008 Best Practices Study | Agencies with Revenues Between $2,500,000 and $5,000,000 | Revenues/Expenses